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Valeant: Vyzulta Approval Actually Big News

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JohnCM Member Level  Wednesday, 11/08/17 05:08:25 AM
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Valeant: Vyzulta Approval Actually Big News

Nov. 7, 2017 12:23 PM ET Seeking Alpha

FDA approved the NDA for Vyzulta after Valeant cleared the necessary hurdles.

A quick look at the market opportunity for the drug.

It's hard to criticize Valeant's pipeline when it continues to produce new commercial products and advances in other notable candidates.

Can new revenue streams make a meaningful difference for Valeant's earnings?

Valeant Pharmaceuticals International Inc. (VRX) got its long awaited approval for Vyzulta after working out the issues affecting its Tampa, Fla., manufacturing facility. Valeant expects to get Vyzulta on the market as quickly as possible with a good chance at grabbing some key market share in 2018, as there is a sizable opportunity for the drug given its advantages over competition. Criticizing Valeant's pipeline of drugs gets harder and harder for bears to do when the company continues to successfully bring new products to commercial viability while advancing early stage candidates at a rapid pace.

The FDA approved the New Drug Application for Vyzulta (latanoprostene bunod ophthalmic solution, 0.024%) as the first prostaglandin analog with one of its metabolites being nitric oxide. It is indicated for the reduction of intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension. This is fine and dandy, but what I always want to know is what sets it apart from the competition and can it grab market share in the coming years. Vyzulta is a molecule with a dual mechanism of action that creates significant, consistent and sustained (IOP) reduction over a 12-month period. It has shown multiple statistically significant results in IOP lowering and efficacy compared to other glaucoma drugs and will look to grab market share from key glaucoma players in the space including Pfizer (PFE), Novartis (NVS), and Allergan (AGN).

The drug approval has been on hold since August when Valeant got a Complete Response Letter from the FDA citing Current Good Manufacturing Practice (CGMP) issues with the company's manufacturing facility in Tampa, Fl. These issues got cleared up when Valeant got a Voluntary Action Indicated (VAI) inspection classification later in August mentioning that the facility still had concerns, but that those concerns were below the threshold of regulatory significance. With all the regulatory issues cleared up, Valeant CEO Joseph Papa was confident enough to state that "We expect to make this new advancement available for those who suffer with glaucoma before the end of the year."

Now, what does the market look like for Vyzulta in 2018 when it attempts to seize market share from its competition? According to Valeant, the company estimates approximately 3 million people in the U.S. suffer from glaucoma with a total glaucoma market opportunity at close to $3 billion. Prostaglandin-analog class drugs, such as Vyzulta, account for roughly $1.6 billion of the total market with about 17 million prescriptions written annually.

Having a superior product, in many respects, to a lot of the competition entering a $1.6 billion dollar market is a big deal. This is just one of Valeant's new products that looks to make a significant impact on sales growth in the coming years with the possibility that Siliq also might make a meaningful impact on dermatology sales. Other pipeline progressions also continue including the latest FDA acceptance of Valeant's marketing application for IDP-118 (halobetasol propionate and tazarotene) lotion for the topical treatment of plaque psoriasis with a June 18, 2018, action date.

Finally, will new commercial products like Vyzulta and Siliq move the needle for Valeant as they both look to seize share in billion-dollar market niches? The company is focused on paying down debt by selling non-core assets and growing revenues as it continues its turnaround strategy so new meaningful revenue streams would be crucial. Here are some revenue and EBITDA numbers over the last year along with the revenue numbers for Dermatology (Siliq) and the company's Bausch + Lomb/International (Vyzulta) segments.

Valeant Revenues Adj. EBITDA Dermatology B + L
Q2, 2017 2.23B 951M 130M 1.24B
Q1, 2017 2.11B 861M 192M 1.15B
Q4, 2016 2.40B 1.05B 214M 1.18B
Q3, 2016 2.48B 1.16B 223M 1.16B
Q2, 2016 2.42B 1.09B 188M 1.28B

As Valeant focuses on aggressively paying down its debt load, growing revenues with new products like Vyzulta will have a chance to produce meaningful new revenue streams that will potentially make a difference, not only in their respective segments but on the company's earnings as a whole. I look for Vyzulta in particular to start making a big splash especially in the second half of 2018. If Valeant can show some consistent growth and momentum next year with new growing revenue streams, look for market sentiment to finally start to shift positive as the company's debt burden continues to shrink. Best of luck to all.

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