Hillary Clinton Is Targeting Valeant Pharmaceuticals Intl Inc.

Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX) has a number of targets on its back.

| More on:
The Motley Fool

Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX) shares plunged once again on Thursday after Hillary Clinton called out the company at a campaign appearance. Here is what she had to say:

This is a letter from someone who’s here. And she gave me this letter. She has to take a brand name drug. She’s been taking it since the early 1980s. At that time, back in the 1980s, for the same drug, it cost approximately $180 for 10 shots. The latest refill she received from her pharmacy was $14,729.99 for the same 10 vials. And the company is one of these companies that is absolutely gouging American consumers and patients. It’s called Valeant Pharmaceuticals. I’m going after them. We are going to stop this. This is predatory pricing. It is unjustified. It is wrong. And we’re going to make sure it is stopped.

At the end of these remarks, the Iowan crowd gave her a standing ovation, which is a fair reflection of how Americans feel about the issue.

So what exactly does this mean for Valeant?

The stars are aligned

Normally, it is very difficult to get legislation passed in Washington. But this issue has strong bipartisan support. To illustrate, in a recent survey by the Kaiser Family Foundation, 83% of Americans favour the idea of letting Medicare negotiate for lower drug prices, including 74% of Republicans.

With that kind of bipartisan support, there’s a chance of legislation even if a Republican gets elected. For what it’s worth, Donald Trump has said that Medicare should negotiate for discounted prices.

Alarmingly for Valeant, the company can’t even get any support from PhRMA, the pharmaceutical industry’s main lobby group. Back in October PhRMA posted an article on its website entitled “What makes Valeant different than innovative biopharmaceutical companies?” PhRMA noted in the article how Valeant spent only 3% of revenue on research and development in 2014 and compared the company to the much-maligned Turing Pharmaceuticals.

Is the stock still cheap enough?

There are a lot of people who still think Valeant is worth owning. To illustrate, 13 analysts rate the stock “Strong Buy” or “Buy” while only one rates the stock “Underperform,” according to Yahoo Finance. And it’s easy to see why–the company trades at a massive discount to its peers.

But let’s not forget that Valeant is the subject of a number of investigations, and we still haven’t gotten to the bottom of its relationship with Philidor. Making matters worse, the company has US$30 billion in debt, so there isn’t much room for error. In my opinion, the stock is simply too risky and there are better options for your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. Tom Gardner owns shares of Valeant Pharmaceuticals. The Motley Fool owns shares of Valeant Pharmaceuticals.

More on Investing

Canadian flag
Investing

1 Magnificent Canadian Stock Down 4 Percent to Buy and Hold Forever

Here's one magnificent Canadian stock long-term investors may want to add, despite the company being near its all-time high.

Read more »

four people hold happy emoji masks
Investing

Why Canadian Investors Should Consider Investing in U.S. Stocks

U.S. lender Oaktree Specialty Lending (NASDAQ:OCSL) has an even higher yield than Toronto-Dominion Bank (TSX:TD).

Read more »

consider the options
Dividend Stocks

Is TD Bank the Best Dividend Stock for You?

Toronto-Dominion Bank (TSX:TD) has a high dividend yield but is embroiled in a serious money-laundering scandal.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

How to Use Your TFSA to Earn $6,000 Per Year in Passive Income

Hint: You'll need this Hamilton covered call ETF, which yields over 10%.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, June 21

Overnight weakness in metals prices could pressure TSX mining stocks at the open today.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Investing

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Here are two TFSA stocks that have excellent capital gains potential as they are leaders in their respective industries.

Read more »

Growth from coins
Dividend Stocks

2 Dividend-Growth Stocks With TSX-Beating Potential That Deserve More Respect

Here are two of the best TSX dividend-growth stocks you can buy today and hold for the next decade.

Read more »

A stock price graph showing declines
Bank Stocks

TD Stock Has Fallen to a Low of $73: Is it Done Dropping?

TD (TSX:TD) is often viewed as a great long-term investment. But given its volatility in recent months, has TD stock…

Read more »