Valeant Pharmaceuticals stock (VRX) is taking a big hit today. What is going on here?

As you can see Valeant Pharmaceuticals’ stock is taking a beating, and it stems from the just reported quarterly earnings.

Things were not great. Total revenues were $2.163 billion for the fourth quarter of 2017, as compared to $2.403 billion in the fourth quarter of 2016, a decrease of $240 million, or 10%.

Total revenues were $8.724 billion for the full year of 2017, as compared to $9.674 billion for the full year of 2016, a decrease of $950 million, or 10%. The decline was primarily driven by the impact of divestitures, and lower volumes in the U.S. Diversified Products segment, attributed to the previously reported loss of exclusivity for a basket of products, and the Ortho Dermatologics business.

Revenues were also negatively affected by the unfavorable impact of foreign exchange. The decline was partially offset by higher volumes in our Bausch + Lomb/International segment, primarily the U.S. Consumer Products business, and increased international pricing in its Bausch + Lomb/International segment.

What about earnings? First when we factor in expenses, operating loss was $322 million for the fourth quarter of 2017, as compared to an operating income of $150 million for the fourth quarter of 2016, a decrease of $472 million. How about for the year? Well, operating income was $102 million for the full year of 2017, as compared to an operating loss of $566 million for the full year of 2016, an improvement of $668 million.

The improvement in operating results for the full year of 2017 reflects gains from divestitures, lower operating expenses, the net decrease in non-cash charges for impairments and net favorable adjustments to acquisition-related contingent consideration. Net income for the fourth quarter of 2017 was $513 million, as compared to a net loss of $515 million for the same period in 2016, an increase of $1.028 billion.

Net income for the full year of 2017 was $2.404 billion, as compared to a net loss of $2.409 billion for the full year of 2016, an improvement of $4.813 billion. The change in net income for the full year of 2017 is mainly attributed to an increase in the benefit from income taxes related to the Tax Cuts and Jobs Act.

Of course, we need to look at comparable numbers. Adjusted net income the fourth quarter of 2017 was $347 million, as compared to $443 million for the fourth quarter of 2016, a decrease of $96 million. OUCH.  Adjusted net income for the full year of 2017 was $1.349 billion, as compared to $1.916 billion for the full year of 2016, a decrease of $567 million. We realize divestitures played a role, but this was painful.

Key developments to be aware of

There were several key developments for Valeant Pharmaceuticals to be aware of. First the company received approval from the U.S. Food and Drug Administration (FDA) for and launched VYZULT, a treatment option for glaucoma

It also received FDA approval for SILIQ and launched it as the lowest-priced injectable biologic for moderate-to-severe plaque psoriasis in the United States based on total annual cost, while also getting FDA approval for LUMIF, the only over-the-counter eye drop with low-dose brimonidine for the treatment of eye redness

The FDA also accepted New Drug Application this year for:

DUOBRII (IDP-118), a topical treatment for plaque psoriasis; PDUFA action date of June 18, 2018

ALTRENO (IDP-121), an acne treatment in lotion form; PDUFA action date of Aug. 27, 2018

JEMDEL (IDP-122), a topical treatment for plaque psoriasis; PDUFA action date of Oct. 5, 2018

Looking Ahead

Looking ahead to the year 2018, we expect more pressure. Pinpointing revenues and earnings is complicated by drug approval timings as well as ongoing operational expenses. Based on the current trajectory of prices, we expect annual revenues in the range of $7.95 – $8.25 billion, and earnings before items of $3,0 to $3.25 billion.

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