Valeant shares get biggest surge in six months, reports profit, raises forecast

MONTREAL -- Shares in Valeant Pharmaceuticals posted their biggest jump in six months Tuesday after the Quebec-based drugmaker reported its first net profit in six quarters, said it made further progress in paying down debt and raised its earnings forecast for the year.

On the Toronto Stock Exchange, the company's stock (TSX:VRX) gained C$3.22 or 24.10 per cent at the close to C$16.58.

Senior executives said they expect Valeant's low share price will continue to improve as the company continues to reduce its debt.

"We think that's going to help us tremendously with the share price going forward," CEO Joseph Papa said during a conference call about first-quarter results.

Valeant's debt was reduced by US$1.3 billion in the quarter and since the first quarter of last year, it has been slashed by US$3.6 billion. The company aims to cut its debt by a total of US$5 billion through operations and asset sales by February 2018.

Valeant, which reports in U.S. dollars, earned $628 million or $1.79 per diluted share, thanks to a $908-million non-cash tax benefit from an internal restructuring. It was Valeant's first net profit since the third quarter of 2015.

Revenue for the quarter ended March 31 fell 11 per cent to $2.11 billion.

Excluding one-time items, adjusted profits were 78 cents per share. Valeant was expected to earn 87 cents per share in adjusted profits on $2.18 billion in revenue, according to analysts polled by Thomson Reuters.

Valeant said its adjusted EBITDA (earnings before income taxes, depreciation and amortization) was $861 million. It increased its full-year guidance for adjusted EBITDA to between $3.6 billion to $3.75 billion, from $3.55 billion to $3.70 billion.

Moody's Investors Service said Valeant's lower debt was welcome but already incorporated in its ratings.

"Delays in generic competition will help Valeant's near-term earnings, but pricing pressures and volume challenges remain," Moody's analyst Michael Levesque said.

Analyst Neil Maruoka of Canaccord Genuity said Valeant is showing positive signs after its shares were hit in March when one of its largest shareholders sold all stock in the company.

"With much of the recent weakness in the stock due to the fallout from Pershing Square's exit, we believe that investors are regaining confidence based on the stability in the quarter," he wrote in a report.