MONTREAL – Valeant Pharmaceuticals International Inc. has surpassed Royal Bank of Canada as the country\’s largest company by market price after shares increased in the wake of solid second quarter results.
Valeant surged a lot more than nine per cent to a 52-week-high of $341.02 per share to achieve a market worth of $116.3 billion around the Toronto Stock Exchange, eclipsing RBC’s $108.9 billion.
Quebec’s pharmaceutical giant has advanced 105 per cent this year, and the stock has shot beyond the analysts’ 12-month target cost of $336 per share. Eighteen analysts possess a ‘buy’ rating on the stock, four get it on ‘hold’ and one has a ‘sell’ recommendation, Bloomberg data shows.
“We do not see this business slowing down any time soon,” wrote Alex Arfaei, an analyst at BMO Nesbitt Burns, in a note Thursday.
Health care stocks are the best-performing sector on the S&P/TSX index over the past year, up 118 percent during that period.
The drugmaker’s meteoric rise this year saw its stock surpass Toronto-Dominion Bank in May, after passing Bank of Nova Scotia in February.
Valeant CEO Michael Pearson says the most recent results demonstrate the company’s ability to grow without acquisitions by boosting its guidance for 2015 after reporting their fourth consecutive quarter in excess of 15 per cent organic growth.
“Our M&A strategy will always be an issue of tuck-ins or bolt-ons, and opportunistically larger acquisitions. One can never predict the timing of a larger acquisition then when those happen, those happen,” said Valeant CEO Michael Pearson on a conference call Thursday. “We don’t use them a timeline.”
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Valeant released its second quarter results on Thursday increasing 2015 revenue outlook by between $300-500 million, from $10.4-10.6 billion to $10.7-11.1 billion.
In the most recent quarter, Valeant said organic growth was up 19 percent on a same-store sales basis, driven by its dermatology, gastrointestinal, contact lenses and dental businesses.
Pearson has said he is certain organic growth continues in the double-digits a minimum of until the end of 2016.
“I think they will still see a higher organic growth compared to what they have in the past but can they sustain that 19 percent? That\’s probably among the high marks,” said Stephanie Price, an analyst at CIBC World Markets.
The company reported a total revenue of $2.7 billion in the quarter, an increase of 34 percent over this past year and $200 million over the first quarter outlook.
Pearson said the results were driven by strong performances within the U.S. market, in addition to sales in Asia, Australia, Canada, Mexico, the Middle East and North Africa.
Valeant did take a $173 million hit in the negative impact of foreign currency in the second quarter.
The company completed its $11.1 billion purchase of Salix Pharmaceuticals Ltd. earlier this year, which contributed $313 million in revenue. The U.S. Fda approved Salix’s ibs drug, Xifaxan, in May.
Prior towards the acquisition, Salix had difficulties with an inventory pile-up, though Pearson says levels have been reduced from four to five months, to 3-3.5 months.
The company let go 258 Salix employees in April included in a $500-million cost-savings plan which Pearson said will reach $530 million by the end of the year.
Valeant has made cuts to sales people following previous acquisitions, though this is not the case with Salix in which the team remains largely intact because the company awaits regulatory approval for its direct-to-customer advertising campaign.
A serial acquirer, last week Valeant said it tends to buy Amoun, a major Egyptian pharmaceutical company, for about US$800 million as a platform for more expansion in the Middle East and North Africa.
Pearson says so far the company has signed eight tuck-in deals this year and says Valeant is looking for opportunities to grow in Latin America.
“I believe there are a lot of smaller guys available they can still consolidate so we aren\’t worried about deficiencies in targets,” said Price.
“In the high end there\’s a limit to the number of large acquisitions available, but I don\’t believe we\’re anywhere near that limit right now.”
With files from Bloomberg