Analysts are weighing in on the controversial drug giant Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Lexington biotech company Synta Pharmaceuticals Corp. (NASDAQ:SNTA), as shares of both companies fell sharply today, reaching record lows.
Valeant Pharmaceuticals Intl Inc
Citron Research has published a report implying that Valeant artificially inflates its revenue through its relationship with specialty pharmacies including Philidor and R&O. Valeant shares reacted to the news, dropping 19.38% to $118.32, making it among the top losers today.
Nomura Holdings analyst Shibani Malhotra commented: “On the 3Q15 call, Valeant also discussed that R&O is one of the specialty pharmacies in the company’s network, and Valeant had sent a letter to R&O requesting payment for ~$69mn gross and $25mn in net revenues for products R&O dispensed to patients that are reflected in Valeant’s receivables. The report primarily alleges that these specialty pharmacies were created for Valeant to book revenues for product it has not sold. While we have been unable to share our analysis with or speak with Valeant, our own diligence suggests that this is not accurate.”
“Valeant has stated numerous times and publicly that it only books revenues on products sold through specialty pharmacies when they have been dispensed; we would use the current weakness as a buying opportunity,” the analyst added.
Malhotra reiterated a Buy rating on Valeant shares, with a price target of $290, which implies an upside of 144.5% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Shibani Malhotra has a total average return of 30.5% and a 95.5% success rate. Malhotra has a -7.1% average return when recommending VRX, and is ranked #153 out of 3795 analysts.
Out of the 20 analysts polled by TipRanks, 15 rate Valeant Pharmaceuticals stock a Buy, 4 rate the stock a Hold and 1 recommends a Sell. With a return potential of 116%, the stock’s consensus target price stands at $256.29.
Synta Pharmaceuticals Corp.
Today, Synta Pharmaceuticals shares dropped 64% on the announcement that the Company has decided to terminate its Phase 3 GALAXY-2 trial of ganetespib and docetaxel in the second-line treatment of patients with advanced non-small cell lung adenocarcinoma.
Adding insult to injury, Cowen analyst Boris Peaker downgraded shares of Synta Pharmaceuticals from an Outperform to a Market Perform rating, without providing a price target.
Peaker wrote, “We think the failure of GALAXY-2 highlights the difficulty in selecting patients who may be HSP90i-sensitive, despite SNTA’s efforts. We expect this to remain an issue in the HSP90 space and do not anticipate future corporate-sponsored trials until a reliable biomarker/signature can be identified.”
The analyst continued, “Management plans to analyze the data and samples from GALAXY-2 to extract as much data as possible to help ISTs and any future studies. We do not expect any insight gained from GALAXY-2 analysis to effect the potential outcome of these ongoing studies. Despite some of these programs being in the late stage of development, we expect investors to attribute little if any value to these programs. We have seen little to no data from the ongoing ISTs (GANNET53 in ovarian, I-SPY in breast cancer and AML-LI-1/18 in AML) and have little visibility on when to expect the next data updates.
According to TipRanks.com, analyst Boris Peaker has a total average return of 20.6% and a 45.1% success rate. Peaker has a -8.1% average return when recommending SNTA, and is ranked #124 out of 3795 analysts.
All the 3 analysts polled by TipRanks rate Synta Pharmaceuticals stock a Hold. With a return potential of 103.3%, the stock’s consensus target price stands at $1.50.