Valeant Pharmaceuticals Intl Inc
Shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) are up over 7% today after the Wall Street Journal reported Friday that Valeant recently rejected a takeover offer from Takeda Pharmaceutical and private-equity firm TPG.
BMO Capital analyst Alex Arfaei was the first to comment: “While we have repeatedly argued that VRX is probably undervalued relative to what we believe to be the underlying fundamentals, we simply did not have enough conviction in the new trajectory of the underlying fundamentals to argue for an Outperform rating. For example, we see Valeant’s tax rate going higher as G20 countries look for ways to close the gaps in existing international rules that allow profits to be shifted to lower tax jurisdictions. This combined with ongoing pressure from payers, and uncertainties regarding the margin and the volume of the products going through the Walgreen’s channel per the deal, cast significant uncertainty over our forecasts.”
“We believe today’s news is positive, because it introduces a new takeout variable to the bull side of the argument. We had argued that Valeant is worth at least $45/share on a sum of the parts basis based on what we believe are realistic-to-conservative assumptions. We thought that it was more likely that Valeant would sell non-core assets, as opposed to the entire company, and identified roughly $6Bbn in such assets that Valeant could sell during the next 18 months to lower its debt,” the analyst concluded.
Arfaei reiterated a Market Perform rating on shares of Valeant, with a price target of $44, which implies an upside of 50% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Alex Arfaei has a yearly average return of 5.2% and a 63% success rate. Arfaei has a -13.6% average return when recommending VRX, and is ranked #633 out of 3958 analysts.
Out of the 27 analysts polled by TipRanks, 9 rate Valeant stock a Buy, 13 rate the stock a Hold and 5 recommend to Sell. With a return potential of 140%, the stock’s consensus target price stands at $70.06.
Shares of Relypsa Inc (NASDAQ:RLYP) rose over 11% today after competitor AstraZeneca announced receipt of a complete response letter (CRL) from the FDA for ZS-9, a treatment for dangerously high potassium. The CRL allows Relypsa and partner Sanofi to further establish Veltassa as the sole option for nephrologists and cardiologists learning to prescribe a new treatment for chronic hyperkalemia.
In reaction, Cowen analyst Eric Schmidt reiterated an Outperform rating on shares of Relypsa.
The analyst wrote, “AZN’s woes are likely to translate into improved long-term market share for Relypsa. Nonetheless, with Veltassa’s launch now ongoing the primary focus of investors has turned from the relative (which drug is better and will take more share) to the absolute (how big is this market and how fast will it materialize). Unfortunately, Veltassa is off to a slower than expected start, and will have to show signs of improved uptake before investors buy into the view that the hyperkalemia marketplace could be worth >$1B. Reimbursement continues to be the gating factor for adoption of a novel cardio-renal drug like Veltassa, and visibility on when we might see an inflection in prescribing trends is limited. Hence unless AZN’s woes prompt a potential strategic acquirer to enter the fray, RLYP investors will need to take a longer-term view toward value creation.”
According to TipRanks.com, analyst Eric Schmidt has a yearly average return of 16.1% and a 54% success rate. Schmidt has a -14.3% average return when recommending RLYP, and is ranked #102 out of 3958 analysts.