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An Investor's View of Valeant Pharmaceuticals for 2017

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Part 4
An Investor's View of Valeant Pharmaceuticals for 2017 PART 4 OF 6

VRX’s Gastrointestinal Segment Saw Robust Revenue Growth in 2016

Gastrointestinal segment

In 3Q16, Valeant Pharmaceuticals’s (VRX) Gastrointestinal product segment witnessed a drop in revenues due to unfavorable changes in drug pricing. This was attributed to the rebates offered by the company to managed care providers in an attempt to increase access to Xifaxan.

VRX&#8217;s Gastrointestinal Segment Saw Robust Revenue Growth in 2016

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Growth trends

In 3Q16, Xifaxan witnessed a 14% year-over-year (or YoY) rise in total prescriptions. In the first nine months of 2016, the YoY growth in prescriptions was even more pronounced, at around 24%. Other Gastrointestinal drugs such as Uceris and Apriso also reported robust growth in prescriptions in 3Q16.

Since September 2016, Valeant Pharmaceuticals has been working on improved managed care access for its oral Relistor drug. Currently, ~50% of the total commercially covered lives have access to Relistor. Valeant Pharmaceuticals plans to give strong competition to other gastrointestinal players such as Allergan (AGN) and GlaxoSmithKline (GSK).

Business sales

Valeant Pharmaceuticals (VRX) announced that it was considering the option of selling of its Salix business, which includes its Gastrointestinal portfolio. To learn more about this development, please read Valeant to Sell Salix Business to Takeda.

On November 29, 2016, Valeant Pharmaceuticals announced plans to expand its sales force for marketing Xifaxan to primary care practitioners (or PCPs). Xifaxan would be a treatment option for irritable bowel syndrome with diarrhea (or IBS-D) and Relistor as therapy for opioid-induced constipation. This signals the possibility of the company retaining its Salix business.

On November 30, 2016, it was reported that talks with Takeda Pharmaceuticals (TKPYY) had failed due to the lack of agreement related to the transaction’s price.

While these changes may increase operating expenses in the short term, they are expected to have a positive impact on Valeant Pharmaceuticals’s long-term profitability. This could subsequently boost the company’s share prices as well as those of the Global X Guru Activist ETF (ACTX). Valeant Pharmaceuticals makes up about 0.25% of ACTX’s total portfolio holdings.

In the next article, we’ll analyze the growth prospects for Valeant Pharmaceuticals’s Diversified segment.

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