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Valeant: Trouble from J&J product

May 9, 2017

Valeant Pharmaceuticals International (VRX) is slated to release first quarter financial results on Tuesday. But heading into the event, David Maris over at Wells Fargo took a dive into the drug maker’s 2016 10-K filing and uncovered that the troubled drug maker faces 33 lawsuits involving the Shower to Shower body powder acquired from Johnson & Johnson (JNJ).

For those in need of an update, J&J faces a deepening legal crisis connected to the product. Last week, a Missouri jury awarded $110 million to a woman who blamed her ovarian cancer on the company’s talcum products. Last year, J&J lost several similar cases, including verdicts of $72 million, $70 million and $55 million, and faces multiple federal class action suits.

Valeant acquired Shower to Shower from J&J in September 2012. Wells Fargo’s Maris remains bearish on Valeant and warns of “bad news” ahead.

As we have stated previously, we believe Valeant’s Shower to Shower suits as well as other suits and investigations represent potential liabilities and risks for Valeant. While Valeant faces only 33 of these suits as of the last 10-K, this number has been growing. With the upcoming quarter, Valeant will likely update the number of suits the company currently is facing. We note to investors, according to Valeant, the company has not reserved against losses for the insider trading suit, product liability suits, class action suits, SEC investigation, Southern District investigation, and IRS reviews.

Maris isn’t the only analyst waiting for updates from the beaten-down specialty drug maker. Last week, RBC’s Douglas Miehm and Joel Hurren, who have a Sector Perform rating on the stock, predicted updates about asset sales, debt repayment, the outlook for Xifaxan and a potential re-branding of the company.

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