On the eve of FDA advisory committee for brodalumab, a new biologic drug being developed for psoriasis, analyst Raghuram Selvaraju of Rodman & Renshaw confidently anticipates implications for biotech titan Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Ahead of the event, Selvaraju reiterates a Buy on the stock with a price target of $90.00.
The analyst is opposing a presently negative climate in the wake of six suicides that occurred during the final stages of clinical testing for brodalumab. Yet, Selvaraju does not see a connection, as he asserts that FDA documentation does not reveal concrete evidence that these suicides were directly caused by the experimental drug. Instead, the analyst notes investors cannot minimize the importance of outside variables, such as mental health battles or other extraneous stressors. While the FDA won’t ignore these deaths, the analyst predicts a black box warning as opposed to absolute rejection.
Appraising the history of other drugs also linked to warnings of hazardous suicidal side effects, Selvaraju compares brodalumab to Chantix and Pfizer- also pegged for like risks, but still approved by the FDA. The analyst explains, “In our view, a black box warning would be sufficient; many biologic drugs carry black box warnings and achieved blockbuster sales anyway (e.g., Enbrel, Humira, and Remicade).”
Another important distinction Selvaraju finds is a link to higher suicides with the very disease brodalumab intends to treat: psoriasis. While the analyst agrees that those who feel patient safety coupled with the downside of a black box warning if issued by the FDA put the commercial success of the drug in immense jeopardy, Selvaraju truly does not foresee this to be an issue. He asserts, “We disagree; while we do not believe brodalumab has blockbuster capability in the U.S. market, it could potentially generate $400 – 500M in peak U.S. sales if approved, even with a black box warning, due to its solid efficacy.”
As usual, we recommend taking analyst notes with a grain of salt. They are often successful in moving the stock price, but you always need to take things into perspective. According to TipRanks, Raghuram Selvaraju is ranked #2,973 out of 4,058 analysts, maintaining a success rate of 40% and garnering a loss of 0.5% in his annual returns.
Out of 17 analysts polled by TipRanks in the last 3 months, 5 rate Valeant Pharma a Buy, with 9 maintaining a Hold, and 3 issuing a Sell. The stock’s consensus target price stands at $39.79 with about a 67% upside.