An Insider And His Wife Are Buying Valeant Pharmaceuticals Intl Inc (VRX)

Peers for Valeant Pharmaceuticals Intl Inc (NYSE:VRX) include Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and Merck & Co., Inc. (NYSE:MRK). Each of these large pharmaceutical companies recorded a decline in net income in the first quarter of 2013 versus a year earlier, with revenue falling in both cases as well. However, Wall Street analysts are bullish on both companies’ prospects. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is expected to increase its earnings per share by enough to give it a forward P/E of 7, even though it is currently valued at 19 times its trailing earnings. Merck is also expected to improve dramatically given its forward earnings multiple of 13 even though we’ve mentioned that it too is struggling. Merck is a potential pick for defensive investors with a beta of 0.4 and an annual yield of 3.6% though we would be concerned about recent performance.

The Bausch & Lomb acquisition would also make Valeant comparable to Novartis AG (ADR) (NYSE:NVS) and Regeneron Pharmaceuticals Inc (NASDAQ:REGN), which are significant players in eye care. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has more than doubled in price in the last year, on large (though unsustainable) increases on both top and bottom lines. A good deal of future growth is already priced in, with investors having bid up the stock price to over 30 times trailing earnings. Novartis AG (ADR) (NYSE:NVS) has also been growing its business, unlike Teva and Merck, and we’d note that it is also an income opportunity (at a 3.5% yield) with little correlation to broader market indices at a beta of 0.4. The sell-side is also looking for earnings growth here, with trailing and forward P/Es of 18 and 13 respectively.

As with any acquisition or series of acquisitions we would have some concerns about integration risk at Valeant, and with recent financial reports showing losses at the company we think that imitating this insider purchase would be too speculative for us. The company’s peers also seem to be priced at levels which anticipate quite a bit of growth this year and next year, and we actually think that we would avoid them at least for now.

Disclosure: I own no shares of any stocks mentioned in this article.