Piper Jaffray analyst David Amsellem continues to sound the alarm on Valeant Pharmaceuticals Intl Inc (NYSE:VRX), after the drug maker received permission from its lenders to renegotiate its agreement that will allow the company to produce trailing 12-month period with adjusted EBITDA of $3.4 billion as opposed to the earlier $4.675 billion.

Amsellem commented, “The amendment in and of itself does not render VRX investable, in our view. The shares are trading at 8.4x EV/2016 EBITDA (based on the low end of VRX’s guidance range of $4.8B-$4.95B issued in June), bearing in mind that we continue to believe that VRX’s implied expectations for a significant 2H16 recovery is overly optimistic. Further, we do not see how potential divestitures recently cited by VRX would put the shares on a stable footing, nor do we see a path to stable EBITDA beyond this year.”

“Suppose that VRX was to execute on the sale of assets totaling $8B in transaction value at 11x aggregate EBITDA (or near $730M), per management commentary on its 2Q16 call. That would take EBITDA down to $4.07B (based on the low-end of the guidance range provided in June), and would take total debt down to $22.8B (assuming all proceeds are indeed used for net pay down). The translates into a pro forma (PF) debt/EBITDA of 5.6x (still quite high), and an PF EV/EBITDA of 7.9x, not exactly attractive particularly considering that there could easily be more pressure on the business (such as the potential pressures on U.S. Neuro/Other that we cite above). Put another way, given these dynamics, why would the shares be rewarded for the execution on the potential divestitures that management recently cited?” Amsellem explained.

Amsellem reiterated an Underperform rating on VRX stock, with a price target of $22, which reflects a potential downside of 25% from last closing price.

As usual, we like to include the analyst’s trackrecord when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst David Amsellem has a yearly average return of -1.1% and a 51% success rate. Amsellem has a 8.9% average return when recommending VRX, and is ranked #3134 out of 4124 analysts.

Out of the 26 analysts polled by TipRanks, 9 are bullish on Valeant stock a Buy, 13 remain sidelined. and 4 are bearish. With a return potential of 1012%, the stock’s consensus target price stands at $58.87.

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