Canada Hits Valeant Pharmaceuticals Intl Inc (VRX) Hard, Skepticism Builds

Valeant Pharmaceuticals Intl Inc (VRX) faces yet another challenge, after executives received cease-trade orders out of Canada

Mar 31, 2016 at 2:21 PM
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Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is down 3.4% at $26.16, and earlier hit a fresh five-year low of $25.75, after a Canadian securities regulator sent the drugmaker's top officers a cease-trade order. Among the recipients is activist investor and VRX board member Bill Ackman. Amid this surprising development, the stock's options are crossing the tape at 1.3 times the expected intraday clip, with puts outstripping calls.

Short-term options traders have shown a preference toward puts over calls. VRX's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) checks in at 2.11, with puts more than doubling calls among near-the-money options in the April series. This includes the April 25 put, where close to 18,000 contracts are in residence.

Options traders aren't the only ones bearishly aligned toward VRX. Of the 17 analysts following the stock, 11 have dished out a "hold" or worse assessment -- including a recent downgrade at Mizuho Securities.

One look at the charts shows why skepticism levels are high. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has given up nearly three-quarters of its value on a year-to-date basis, mostly due to a series of troubling fundamental developments.

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