It’s the final earnings cut for biotech stocks Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). How did the two firms fare after delivering third-quarter financial earnings? Valeant shares are on a crash, with Canaccord analyst drawing attention to the main gaping issue: fourth-quarter guidance. ACADIA shares are experiencing an opposite fate, surging nicely ahead on back of a first full quarter of Nuplazid sales which practically beat consensus twice over, with Cowen left to sing the firm’s praises. Let’s delve deeper:
Valeant Pharmaceuticals Intl Inc
Valeant shares are plunging 21% after missing on the bottom-line in terms of third-quarter results released today, but more significantly from Canacord analyst Neil Maruouka‘s eyes, “dropping a guidance bomb.” As such, the analyst reiterates a Hold rating on shares of VRX with a $33 price target, which represents an almost 120% increase from current levels.
For the third quarter, VRX reported $2.48 billion in revenue, which falls “in line” with the analyst’s projection, but just under consensus at $2.52 billion. Meanwhile, adjusted EBITDA hit $1.16 billion, which falls beneath the analyst’s estimate of $1.21 billion and consensus at $1.18 billion. Adjusted EPS reached $1.55 per share, another miss in terms of Maruouka’s projection for $1.72 per share and the Street’s for $1.77 per share.
The “bomb” comes with a gaping step back in full-year guidance, the analyst explains, “In and of itself, we did not feel that the quarter was terrible; however, the company updated its 2016 financial guidance to a level well below consensus expectations. What’s more, on the conference call, management indicated that 2017 revenue and EBITDA should be lower on a sequential basis, suggesting that Street estimates will be coming down significantly for next year as well. While the 2016 guidance revision was widely expected, both the magnitude and spill-over into next year were not, and we believe investors are now fleeing the stock as the path to growth has grown murkier.”
Overall, “The impact of generic competition, and higher R&D spending to generate longer-term growth will likely be the primary drivers; however, we believe that the market was likely shocked to see hopes for a faster recovery and organic growth evaporate,” Maruouka concludes.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Neil Maruouka is ranked #4,049 out of 4,181 analysts. Maruoka has a 13% success rate and faces a loss of 42.9% in his annual returns. When recommending VRX, Maruouka loses 38.9% in average profits on the stock.
TipRanks analytics exhibit VRX as a Hold. Based on 11 analysts polled in the last 3 months, 3 rate a Buy on VRX, 6 maintain a Hold, while 2 issue a Sell. The 12-month price target stands at $31.85, marking a 114% upside from where the shares last closed.
ACADIA Pharmaceuticals Inc.
ACADIA shares are rising almost 17% after delivering strong third-quarter results yesterday, the biotech firm’s first full quarter of Nuplazid sales nearly doubled consensus expectations, bringing in a whopping, “eye-popping” $5.3MM. On back of a robust financial quarter thanks to a “sales crush” of consensus estimates, Cowen analyst Ritu Baral reiterates an Outperform rating on ACAD with a price target of $42, which represents a 56% increase from where the shares last closed.
For the third quarter, ACAD posted a net loss of $71.6MM and EPS of ($0.61), compared to the analyst’s projection of ($0.38) and the Street’s estimate of ($0.55). The impressive, shining light of the firm’s print enters with Nuplazid sales that far shot ahead of the analyst’s expectations of $2.8MM and consensus of $2.7MM. ACAD closed the quarter with $588.9MM in cash, which the analyst denotes as representative of approximately over 24 months of cash, and this is including “robust sales” as well as marketing expenses for the firm’s Nuplazid launch.
Baral asserts, “We see steady sales growth with increased patient/prescriber experience. ACAD reiterated modest expectations for 4Q16 ADP data; we also note recently initiated trials in AD agitation and schizophrenia as well as 2 additional Ph2 nitiations in undisclosed indications expected by YE2016.”
With regards to a “healthy” initial Nuplazid rollout with sales revenues, the analyst concludes, “We are pleasantly surprised by this sales number given what we viewed as (and ACAD guided to) a likely slow launch with significant prescriber sampling (including a 7-day sample pack from the salesforce and a 30-day free trial). ACAD continues to expect sales to grow steadily over time driven by both growth in number of prescribing physicians as well as patient starts and total patients on drug. We note disease and treatment awareness has increased substantially due to ACAD’s extensive salesforce and outreach initiatives.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, two-star analyst Ritu Baral is ranked #2,591 out of 4,181 analysts. Baral has a 35% success rate and earns 0.0% in her yearly returns. When suggesting ACAD, Baral forfeits 18.2% in average profits on the stock.
TipRanks analytics demonstrate ACAD as a Strong Buy. Out of 9 analysts polled by TipRanks, 7 are bullish on ACADIA stock and 2 remain sidelined. With a return potential of nearly 52%, the stock’s consensus target price stands at $40.57.