Valeant Pharmaceuticals: Scoreboard watching

If sunlight is the best disinfectant, Valeant Pharmaceuticals must be hygenic by now. In 2014 it grabbed attention with a bold $46bn hostile bid for bigger rival Allergan. Its unorthodox management team - the chief executive was a management consultant and the finance head an ex-investment banker - and its controversial business model were scrutinised. Questions still swirl, but a year later Valeant's shares have risen by a clean two-thirds.

Valeant's first-quarter earnings, released late on Tuesday, had the usual split personality. Earnings per share were 21 cents under GAAP rules. The company's adjustments rendered $2.36 (it calls these "cash" earnings). Valeant's serial acquisitions result in big non-cash amortisation expenses stemming from asset revaluations. This accounts for much of the difference between the two earnings figures. In a more unusual move, the company presents a GAAP and adjusted figure for cash flow, too. Excluding restructuring and a "working capital charge related to business development activities" pushes first-quarter cash flow from $500m to $700m. (As for those sour souls who think cash is precisely that which cannot be adjusted - they have missed out on a great stock.)

After the Allergan deal fell apart, Valeant talked up its organic growth strategy for a few months, and then bought gastrointestinal drugmaker Salix for $14.5bn. Valeant points to its record of slashing costs as the key to making such deals work. But it is cheap debt that enables all-cash deals such as Salix to boost earnings. Valeant has boosted its 2015 earning forecast by a tenth. This leaves it trading around 20 times (adjusted) earnings - not especially cheap for a company that buys its growth.

Valeant also announced its CFO Howard Schiller would leave his post after four years (but stay on the board). Fair enough. With all the fiddles in Valeant's reports, he must be exhausted.

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