Valeant’s expected margin performance in 2Q16
During 4Q15 and 1Q16, Valeant Pharmaceuticals’ (VRX) net margin turned negative. That followed its struggling high-margin dermatology products and the foreign exchange impact. VRX then lowered its revenue and net income guidance for 2016. To understand the factors behind this, please read Why Did Valeant Lower Its Guidance for 2016?
To have a closer look at Valeant’s operating expenses, please read What’s behind Valeant’s Operating Expenses?
Valeant’s operational efficiency compared to its peers
Valeant’s net margin is expected to be 21.5% in 2Q16 and 24.5% in 3Q16. In 2016, Valeant plans to launch more than 20 new products, which might help it secure its margins.
In the specialty pharmaceutical industry, Valeant’s competitors Mallinckrodt (MNK) and Shire (SHPG) are expected to report net income margins of 24.3% and 30.2%, respectively, for the period ended June 30, 2016.
Endo International’s (ENDP) net margin is expected to remain at 19.8% in 2Q16. Shire has transformed from a specialty pharmaceutical company into a biotechnology company. This is one of the main reasons behind its higher net margin.
If you’re a risk-averse investor who wants exposure to high-risk equities such as Valeant, you can opt for the Vanguard FTSE All-World ex-US ETF (VEU). By doing so, you can have limited exposure to Valeant since the fund holds 0.02% of its assets in Valeant.