Mizuho Securities analyst Irina Rivkind Koffler was out today with research notes on drug makers Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Relypsa Inc (NASDAQ:RLYP). The analyst reflects on Valeant’s potential criminal charges and Relypsa’s recent earnings report.

Valeant Pharmaceuticals Intl Inc

The Wall Street Journal announced that the Southern District of New York (“SDNY”) was conducting a formal criminal investigation into Valeant over whether or not it committed insurance fraud, sending shares down nearly 10%.

Mizuho’s Koffler commented, “The company responded that this investigation has been previously disclosed in its SEC filings (and that it is fully cooperating) but we note that this degree of detail was not previously provided. This investigation may be a followon to a similar but separate NJ RICO case that seeks treble damages on “hundreds of millions in sales” during the period from Jan 2013-Nov 2015, with over $500M in sales alleged in 2015 alone. We have been struggling with what to do with this stock as we are still not comfortable with the sequential decline in U.S. sales, which is unique amongst other companies in our space, the reiterated 2016 guidance which we still view as challenging, and the company’s ability to meet its existing interest coverage ratio covenants (which it is in the midst of hurriedly amending).”

Koffler reiterated an Underperform rating on Valeant with a price target of $11.00, which represents a potential downside of 55% from where the stock is currently trading.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Irina Rivkind Koffler has a yearly average return of 24.6% and a 60% success rate. Koffler has a 16.1% average return when recommending VRX, and is ranked #16 out of 4110 analysts.

Out of the 17 analysts polled by TipRanks (in the past 3 months), 5 are bullish on Valeant stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of 7%, the stock’s consensus target price stands at $34.20.

Relypsa Inc

In addition, Koffler reiterated a Neutral rating on shares of Relypsa, with a price target of $32, after the company reported second-quarter earnings of $5.2 million in revenue and EPS of ($1.87) versus consensus estimates $4.9 million and a loss of ($1.56), respectively.

The analyst wrote, “This was another low quality beat driven by allocation of the Vifor upfront payment within collaboration and license revenue. After catching up on the details of the deal process, we note that there never really was significant takeout interest in the name after the product launched aside from Galenica, and the couple of other companies that considered Relypsa were deterred by valuation. However, it just took one, and this is an important takeaway when thinking about other potential takeout targets in our universe. We reiterate our Neutral rating and $32 PT based on the Galenica offer and await deal close in 3Q:16.”

Out of the 13 analysts polled by TipRanks, 7 rate Relypsa stock a Hold, while 6 rate the stock a Buy. With a return potential of 7%, the stock’s consensus target price stands at $34.20.