Analysts weighed in today on biopharmaceutical giants Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) in light of recent company updates. While Valeant is receiving feedback from its recently filed 10-K and facing a more bearish outlook, Acadia received FDA approval for its lead drug and maintains a slightly more bullish outlook.
Valeant Pharmaceuticals Intl Inc
On Friday, Valeant filed its 10-K, which provided a comprehensive summary of the company’s financial performance. In light of this release, Canaccord analyst Neil Maruoka weighed in on the stock. The analyst notes that while the report did not contain any “major bombshells,” the filing still brings forward some prominent concerns. He mentions, “challenges remain and [there is] work still to be done.”
Maruoka comments that one key issue the pharmaceutical giant faces is deficiencies in the company’s internal controls. Maruoka notes that while VRX has shown initiative towards solving the issue, the “process has not yet been fully implemented,” and therefore provokes further caution by investors.
Additionally, the analyst mentions concern regarding the company’s over emphasized, and possibly detrimental priority of profit. Maruoka explains, “Repeated references within the 10-K to the ‘tone at the top’ underscore our view that Valeant had fostered a culture that rewarded profitability above everything else, even to the detriment of key relationships with customers, payors, and government.”
Further, Valeant recently announced a “major turnover” within its board, with seven directors leaving the company, three new directors nominated in their place, and a new incoming CEO, Joseph Papa. Maruoka mentions this relatively substantial change “should represent the beginning of a new path for the company.”
The analyst further elaborates on the shakeup of board directors, commenting “We view Valeant’s strained relationships with managed care as a significant area of concern, and remain cautious ahead of a likely weak Q1.” On a more optimistic note, however, Maruoka acknowledges the possible positive influence of Papa, mentioning “We look forward to greater clarity of the new strategy of the incoming CEO, possible divestitures (if any), and indications of how the company will deal with its heavy debt burden.”
Maruoka’s mix of optimism and added concern emulate his reiterated Hold rating for VRX, and price target of $40.00. The analyst concludes claiming, “We believe the company must continue to work to rebuild investor confidence and establish effective internal controls; however, we are hopeful that the filing of the 10-K signals the close of a turbulent chapter for Valeant.”
Maruoka’s rating falls in line with the overall analyst consensus recommending a Hold rating for the stock.
According to TipRanks, 33% of analysts are bullish, 48% are neutral, and 19% are bearish for VRX. The average price target is $49.00 with a 46.88% upside.
ACADIA Pharmaceuticals Inc.
On Friday night, Acadia Pharmaceuticals received approval for its leading drug, Nulazid (pimavanserin). The drug, meant to treat Parkinson’s Disease Psychosis (PDP), is scheduled to launch in June along with a patient access/support plan. The drug is expected to include a black box mortality warning and labeling language. However, based on efficacy and safety of pimavanserin for PDP, the new drug has the upper hand, and is well qualified to fill an unmet need. The drug will also be investigated as an add-on therapy for schizophrenia.
In light of this game changer for Acadia, Cowen analyst Ritu Baral weighs in. Baral reiterated and Outperform rating on ACAD with a $41.00 price target.
The analyst mentions concern regarding the precaution of the drug, but brings forward a more positive indicator noting that while there is “warning and precaution language to avoid use with other QT prolonging drugs/certain anti-arrhythmics, there is no contraindication in the label. Efficacy data are presented as expected with no commentary on strength of effect, and positive motor function data are included in the label underscoring lack of motoric side effects seen with Nuplazid in PDP (a potential key differentiator).”
With an upcoming conference call approaching Monday, May 2, the analyst expects “an update on hiring” as well as “updates on other strategic marketing topics.” She explains there will be various key focus issues ahead of the call. A key investor focus according to the analyst is the company’s strategic BD. However, Baral mentions that due to a recent conversation with management, she does “not believe [Acadia] will launch a formal sale process in the near-term.”
Another pivotal issue according to the analyst, is the company’s sales-force personnel. More specifically, concern arises in the “timing of hires as well as training ahead of a June launch.”
Further, the analyst indicates concern regarding clinician targeting strategy and timelines, as well as updated timelines of payor discussions. Additionally, Baral anticipates ACAD’s new short-term sampling program, NUPLAZIDconnect, to help with drug cost financial assistance and/or access assistance.
According to TipRanks, Baral’s prediction succeed 39% of the time, ultimately delivering a one-year average return per recommendation of 5.1%. Among Baral, in the past three months, 9 additional analysts gave ACAD a Buy rating. All recommendations amounted to a 12-month average price target of $50.40, marking a 55.27% upside from where shares last closed.