Valeant Pharmaceuticals Intl Inc (VRX) Tests Support After Papa Comments

Valeant Pharmaceutical Intl Inc (NYSE:VRX) shares are testing the $30 level after comments from CEO Joseph Papa

Sep 8, 2016 at 1:11 PM
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While several biotechs have had their day in the sun this week, sector peer Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is struggling yet again, after comments made to CNBC by CEO Joseph Papa. Papa last night said Valeant is looking to reduce some of its $30 billion in debt through the sales of non-core assets, and he would "never say never" to selling core assets like Bausch & Lomb. The CEO also said VRX has retained new general counsel to help the biotech navigate lawsuits and investigations into its pricing practices.

Although VRX is down by over 87% year-over-year, sentiment in the option pits has had a bullish lean as of late. VRX's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.17, in the top 76th percentile of its annual range. In addition, VRX's Schaeffer's put/call open interest ratio (SOIR) of 0.80 sits lower than 87% of all other readings from the past 12 months, indicating short-term option players have rarely been more call-skewed over the past year.

Given VRX's recent struggles, though, some of the call-heavy action in the option pits could actually be short sellers hedging their bets. VRX's short interest is up 11.5% over the last two reporting periods.

On one hand a certain amount of optimism may not be unwarranted, considering VRX's recent breakout above its 30-day and 50-day moving averages. Also encouraging is VRX's move above the $28 level – specifically $28.09, which is 150% above the year-to-date closing low of $18.73, notched on June 27. The shares were rejected at the $28 mark in mid-August, but seem to have found support since surpassing and successfully testing the level on Sept. 2.

On the other hand, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is currently struggling to keep its footing above the $30 level. Although the shares have touched or traded above this round-number level every session since Aug. 17, VRX has only managed a weekly close above the $30 level once so far. The shares are hovering near this critical level today, most recently seen down 0.3% at $30.16.

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