Healthcare analysts provide insight on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) with differing opinions. ACADIA gained an FDA Advisory Committee approval for a Parkinson’s related drug, increasing the chances of approval in May and representing a major catalyst for the stock. On the other hand, Valeant is doing everything it can to improve its debt nightmare, though one analyst is not convinced the recent moves will rescue the stock.

ACADIA Pharmaceuticals Inc.

Yesterday, the FDA advisory committee endorsed Acadia’s Parkinson related psychosis (PDP) drug, Nuplazid. The panel voted in favor of the drug’s effectiveness, safety, and benefit/risk ratio. Currently, there are no FDA approved drugs to treat PDP, and the FDA is set to vote on approval of the drug by May 1. During trials of the drug, 10 patients had to drop out of the study due to adverse effects, and 3 died as a result. While the FDA does not have to take the Advisory Committee’s suggestions into consideration, many believe the drug will be approved as a result of the endorsement. If approved, the drug is estimated to have a $1 billion market value.

Analyst Andrew S. Fein of H.C. Wainwright explained why he is bullish on the stock following the vote in favor, believing it is a good indication that the drug will be approved on its May 1st voting day. He states, “Meanwhile, in our view, the open question coming out of the AdCom was not the approvability of the drug, but instead: (1) whether the agency will elect to further qualify the label indication (from “psychosis associated with PD” to “psychosis associated with PD treated with dopaminergic agents”); and (2) whether the agency will attach a black box warning to the label.” Although he does cite a “high likelihood” of a black-box warning, the most severe FDA warning, he does not see a material effect to the “uptake of the drug.”

Fein goes further into detail regarding the drug’s potential black box warning. He cites a debate of the Advisory committee’s reasoning (not decision) for a black-box warning.  The panel is unclear if 3/124 deaths in trials is enough to warrant the warning, explaining that although patients died from the drug, “the mortality data from the study are not deep enough to be reliable.” Rather, the panel can issue the warning on the drug because “all anti-psychotics” Have the label, which brings into question whether the drug qualifies as such. He explains, “We elect not to engage in this debate (there is no answer!), but since both directions lead to a box warning we believe that our safety-bent agency will certainly get there one way or the other.”

The analyst reiterates a Buy rating and $50 price target on the stock. According to TipRanks, Andrew Fein has a 42% success rate recommending stocks with an average return of 1.5% per recommendation. Out of the 9 analysts who have rated the stock in the past 3 months, all are bullish on the company. The average 12-month price target for the stock is $52.38, marking a 93% upside from current levels.

Valeant Pharmaceuticals Intl Inc

Mizuho analyst Irina Rivkind Koffler weighed in on Valeant after the company announced it started the process to obtain a waiver to amend its credit facility. In addition, the company is requesting a deadline to file its 10-K to May 31 (previously April 29th) and to file its 10-Q on July 31 (previously June 14). The company is requesting that “to amend its interest coverage maintenance covenant and certain financial definitions within the loan agreements to gain more leeway in its financial covenants.” As part of the agreement, which over 50% of loan holders would have to approve, the company will “allocate all proceeds from asset sales to prepayment of term loans,” a highly likely in Koffler’s opinion. The analyst predicts an $11.6 billion carrying value for the debt.

While this type of process is “not unusual” for high-debt companies, it is not a good sign. The analyst notes that banks usually ask for increased interest, a wider spread, and increased fees on the principal. She also notes news that “lenders may be offered a 50 bps fee and 50 bps bump in coupon.” The analyst predicts that the 10-k filing will ease creditor concerns and provide more clarity on the company’s financials. Related, the analyst notes that the company’s Ad Hoc Committee did not find any additional hurdles in the company’s financial statements. However, she “[takes] little comfort in this update.” Koffler predicts that in 3Q:16, the company may provide “additional bombshells” on recently exited CEO Michael Pearson’s Congressional testimony, set for April 27.

Koffler states, “We continue to view consensus estimates as too high and worry that Valeant’s revenue base will erode over time while the company allocates all available cash to debt repayment. We see no quick fix to the situation via asset sales or division break-ups.” As a result, the analyst reiterates an Underperform rating on the stock with a $18 price target.

Irina Rivkind Koffler is ranked #15 out of 3,828 analysts on TipRanks. She has a 53% success rate recommending stocks and an average return of 28.1% per recommendation. Out of the 22 analysts who have rated VRX in the past 3 months, 7 gave a Buy rating, 4 gave a Sell rating, and 11 remain neutral. The average 12-month price target for the stock is $54.88, marking a 96% upside from current levels.Irina Koffler Consensus