As Incyte Corporation (NASDAQ:INCY) presents its findings on a pipeline drug to measure effectiveness, Valeant Pharmaceuticals Intl Inc (NYSE: VRX) terminates its relationship with subsidiary Philidor after recent allegations that the two companies collaborated to inflate drug prices. Analysts weigh in on these developments.
Valeant Pharmaceuticals Intl Inc
On October 30, Valeant terminated its relationship with Philidor Rx Services after news that managed care companies CVS, Express Scripts, and UnitedHealth removed Philidor from their networks. On November 2, Canaccord Genuity analyst Neil Maruoka weighed in on Valeant by reiterating a Buy rating but lowering his price target to $170 down from $190.
Bringing the development into perspective, Maruoka remarked, “We believe that (for the first time) these events are likely to have a tangible impact on earnings. While only 6.8% of the company’s revenue flowed through the Philidor network in Q3, this will nonetheless result in transient organic growth headwinds.” Since September, Valeant has been in crisis mode after it was hit by allegations of illegally collaborating with Philidor in order to inflate its drug prices.
The analyst believes Valeant will face more allegations in the future including a potential SEC inquiry. However, according to Maruoka, “There is no evidence that Valeant has done anything wrong. While the company may have been aggressive in its strategy to drive growth, we continue to have confidence in the integrity of CEO Mike Pearson.”
In his investment note, under the heading “This too shall pass,” he reminds investors that pharma companies are highly regulated industries. Consequently, major pharma companies often endure several allegations and government investigations.
According to TipRanks, Neil Maruoka has rated Valeant 22 times with a success rate of 14% and an average loss of -28.6% per recommendation. Out of 17 analysts who cover Valeant, 11 have recommended it as a Buy, 5 analysts are on the sidelines, while only 1 analyst is bearish on the stock with a Sell rating. The average 12-month price target for the stock is $195, marking a nearly 94% potential upside from current levels.
On November 6, Incyte will be presenting preliminary results from their ongoing phase 1/2 trial of epacadostat + pembro (INCB024360), a cancer fighting drug, at the Society for Immunotherapy of Cancer’s (SITC) Annual Meeting in Maryland. Ahead of the announcement, Joshua Schimmer from Piper Jaffray weighed in, reiterating his Overweight rating for the stock with a price target of $130.
According to Schimmer, the presentation will provide a preliminary opportunity to assess whether or epacadostat + pembro can produce better results than what pembro can achieve alone. He added however, “That said, these will be small preliminary patient numbers so there is a wide range of inconclusive outcomes.”
Recently, epacadostat was in the news after Incyte expanded its ongoing clinical collaboration with Merck. On October 13, both companies had announced that this collaboration would include a Phase 3 study evaluating the combination of epacadostat and Keytruda, Merck’s anti-PD-1 therapy, as first-line treatment for patients with advanced or metastatic melanoma.
Schimmer stated that epacadostat, Incyte’s leading IDO1 inhibitor, is excluded from his current model because the company is waiting for additional data. He added, however, that epacadostat “has the potential to become a multi-billion blockbuster drug if successful.”
Schimmer has rated Incyte’s stock 7 times. Based on these ratings, his success rate for the stock is 100% and his average return on the stock is 18.7%. Based on TipRanks’ data, out of 9 analysts who have recently rated Incyte’s stock, 8 have rated it as Buy, while 1 has rated it as Hold; none of the analysts have given a Sell rating to the stock. The average consensus price target for the stock is $128.83, an upside of about 8% over current levels.