In an attempt to rectify a tumultuous year, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has poached a CEO from Perrigo Company plc (NYSE:PRGO). Following this announcement and an updated, albeit disappointing, guidance from Perrigo, analysts weigh in with new expectations for the biotech giants.

Valeant Pharmaceuticals Intl Inc

After a year plagued by fraud accusations, congressional probes, and falling share prices, Valeant finally received some welcomed news. The embattled pharmaceutical company will be replacing its outgoing CEO, Mike Pearson, with Joseph Papa, the current CEO of Perrigo. Canaccord analyst Neil Maruoka weighs in on this transition, noting that it will “provide some much needed stability at the top” of Valeant.

Maruoka explains that Pearson’s “tumultuous tenure” led Valeant into its peak stock price of $260, followed by a 90% fall to $25. The analyst explains, “We expect that the addition of Mr. Papa is likely to bring an entirely different tone to the organization with less of an emphasis of growth through acquisition and more of a focus on solidifying the base businesses and rebuilding relationships.”

While Papa will be a positive for the company, Maruoka remains on the sidelines due to several concerns. He continues to wait for Valeant’s 10-K, which is expected this week. He notes this is “somewhat reassuring” because Valeant also indicated that following the filing, “it will have remained in compliance with all financial covenants in question.”

However, the analyst remains concerned by the company’s “internal control deficiencies” and “managed care miscalculation.” Maruoka explains, “We view Valeant’s strained relationships with managed care as a significant area of concern. We believe managed care is likely to create growth headwinds in 2016 and, as such, these relationships should be a priority as they present some major potential risks for the company.”

Due to these several concerns, Maruoka reiterates a Hold rating on Valeant with a $40 price target, marking a 14% upside.

According to TipRanks, 33% of analysts covering Valeant are bullish on the company, 48% are cautious, and 19% are bearish. The average 12-month price target is $49, marking a 39% potential upside.


Perrigo Company plc Ordinary Shares

Following the sudden but not-so-surprising resignation of CEO Joe Papa, UBS analyst Marc Goodman shares his thoughts on Perrigo’s new management and resets his expectations following the company’s preliminary first quarter figures. Even though Perrigo’s shares plummeted 18% in trading yesterday following the release of disappointing pre-earnings estimates, the analyst remains bullish on the company.

Goodman explains that Perrigo has already appointed John Hendrickson, previously President, to CEO, and has already elected Laurie Brlas as Chairman thanks to decision to separate the roles of CEO and Chairman.

More pressing, the company released preliminary first quarter 2016 figures yesterday, leading Goodman to comment on the “disappointing” numbers. The company expects first quarter sales between $1.33 billion and $1.35 billion, below the analyst’s range of $1.37 billion to $1.39 billion, and EPS between $1.71 and $1.77, also below the analyst’s estimate of $1.89. Goodman explains that the decrease stems from “a reduction in pricing expectations in the Rx segment due to industry and competitive pressures in the sector,” as well as “weaker-than-expected performance within the [branded consumer healthcare] segment for the next three quarters and lower expectations for new product launches.”

Furthermore, Goodman explains that there is “potential for impairment associated with the Omega deal.” Perrigo completed its acquisition of Omega Pharma in March 2015 in a deal valued at 3.8 billion euros. In Perrigo’s fourth quarter conference call, management indicated that Omega was not meetings its internal expectations, and consequently lowered guidance. The analyst continues, “It looks like the business may be worse off than management previously indicated, and that it overpaid for this asset given the expected impairment charge.”

Goodman believes that investors will retain a “wait and see” attitude, “especially until the new CEO provides his thoughts on the outlook for the company, which [he] fully expect[s] will be more conservative than that of the old regime.”

As a result, Goodman reiterates a Buy rating on the company with a $169 price target.

According to TipRanks, 50% of analysts covering Perrigo are bullish on the company, 33% are neutral, and 17% are bearish. The average 12-month price target is $147.90, marking a 49% potential upside from where shares last closed. Goodman has a 62% success rate recommending stocks with a 5.3% average return per rating.