As both earnings and election season are coming to a close, analysts are chiming in with varied expectations for three biotech players: Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Synergy Pharmaceuticals Inc (NASDAQ:SGYP), and Omeros Corporation (NASDAQ:OMER). Rodman & Renshaw has taken a step back with a subsequent downgrade on VRX after its third-quarter results did nothing to instill confidence paired with a management update fraught with concern. Conversely, the analyst is far more bullish on SGYP and significant impending clinical approvals just around the corner. As for OMER, Cantor recognizes the beginnings of a sales resurgence after a sluggish summer period. Let’s take a closer look:
Valeant Pharmaceuticals Intl Inc
Valeant shares are ascending almost 5% in a post-election surge. On the heels of the troubled biotech giant’s third-quarter earnings miss released on Tuesday, November 8th, Rodman & Renshaw analyst Ram Selvaraju is now “stepping to the sidelines,” downgrading from a Buy to a Neutral rating on shares of VRX with a $23 price target, which represents just under a 37% increase from current levels.
For the quarter, VRX brought in adjusted cash EPS of $1.55, far short of the analyst’s estimate of $1.71, and revenue of $2.48 billion that came up shy compared to the analyst’s projection of $2.53 billion. For 2016, the giant has cut back on guidance from a range of $9.9 to $10.1 billion down to $9.55 to $9.65 billion, while lowering adjusted cash EPS from a range of $6.60 to $7.00 down to $5.30 to $5.50. Presently, the analyst calls for $9.6 billion in revenue and $5.41 in adjusted cash EPS for the financial year of 2016.
Ultimately, “The tone struck on the conference call was markedly different from that observed in only the previous quarter, with management indicating expectations for a sequential decline not only for the final quarter of 2016—traditionally a seasonally strong one for the company—but also, more disturbingly, for 2017 as well. Since we cannot forecast when the company might return to growth, and given the continuing litany of risks that Valeant faces, including ongoing legal challenges, subpoenas, regulatory warning letters, and possible criminal investigations of its former executives, we believe that the prudent move would be to step to the sidelines at this juncture,” Selvaraju contends.
However, not all hope is lost as the analyst acknowledges the giant’s “long-term future may prove better,” with growth recovery, even if “albeit at a far slower pace than was seen in the past.” As the rumor mill chatters about near-term asset sales to lesson the load of the company’s massive burdens of debt, Selvaraju believes “visibility on divestitures would be welcome,” but to date, there have been no official transaction confirmations yet.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Ram Selvaraju is ranked #4,005 out of 4,200 analysts. Selvaraju has a 33% success rate and faces a loss of 6.6% in his yearly returns. When recommending VRX, Selvaraju loses 16.2% in average profits on the stock.
TipRanks analytics exhibit VRX as a Hold. Out of 11 analysts polled by TipRanks, 2 are bullish on Valeant stock, 7 remain sidelined, and two are bearish on the stock. With a return potential of 47%, the stock’s consensus target price stands at $24.75.
Synergy Pharmaceuticals Inc
On Wednesday, November 9th, Synergy posted its third-quarter financial print and coupled with IBS-C and CIC “approval on deck,” Selvaraju maintains his bullish forecast on the biotech firm’s prospects. With reiterates a Buy rating on SGYP with a price target of $15, which represents a 182% increase from where the shares last closed.
At the close of the third quarter, SGYP had $109 million in cash and $76 million in long-term debt, when considering the remaining convertible notes outstanding.
SGYP is lined up to reach two considerable milestones in the near-term, specifically a pivotal top-line data read out from two Phase 3 studies evaluating key pipeline contender plecanatide in the constipation-predominant irritable bowel syndrome (IBS-C) setting as well as a prospective U.S. regulatory approval of plecanatide in the chronic idiopathic constipation (CIC) indication. The former could be released by the close of 2016 and the latter’s decision date is set for January 29, 2017.
Selvaraju affirms, “Given the highly favorable data supporting the efficacy and safety profile of plecanatide in CIC, where the drug has been tested on over 3,500 patients, and the favorable late-cycle review meeting between the company and the FDA, we believe that Synergy and regulators may already be finalizing the terms of plecanatide’s approval in CIC, including discussions on labeling, and continue to anticipate a timely approval of the drug. In anticipation of both positive data with plecanatide in IBS-C and nearterm approval of the drug in CIC, we reiterate our Buy rating and 12- month price target of $15.00 per share on SGYP.”
When suggesting SGYP, Selvaraju gains 22.1% in average profits on the stock.
TipRanks analytics demonstrate SGYP as a Strong Buy. Based on 3 analysts polled in the last 3 months, all 3 rate a Buy on SGYP. The 12-month price target stands at $13.00, marking a nearly 145% upside from where the stock is currently trading.
Omeros shares are on a 17% rise after delivering third-quarter results on Wednesday, November 9th. Cantor analyst Elemer Piros acknowledges that the firm experienced a “slower summer” in terms of drug sales, but is now “back on track.” In reaction, the analyst reiterates a Buy rating on shares of OMER with a $21 price target, which represents a close to 77% increase from where the stock is currently trading.
For the quarter, the firm posted sales for its only commercial pipeline drug OMIDRIA, a therapy used in cataract and intraocular lens replacement procedures, that reached $11.3 million, which Piros notes is “practically in line” with the Street’s expectations for $11.6 million.
Piros sings the praises of OMER, noting, “Omeros experienced a relatively slow summer for its product OMIDRIA, which is used in elective lens replacement surgeries. However, orders rebounded nicely in September.”
Presently, the firm anticipates an annualized revenue run rate of $55 million. In light of the print, Piros has tightened both 2016 estimates, from $45 million to $42 million, as well as 2017 full year estimates, from $92 million to $87 million.
The analyst opines, “The company’s OMIDRIAssure payment assistance program continues to grow along with revenue. The recent push to sell the drug more aggressively to hospital outpatient clinics is associated with lower revenue/vial. However, the ‘stickiness’ of those hospital revenues may more than make up for the discount in the long run.”
With regards to the pipeline, the company’s complement inhibitor OMS721 is amid evaluation in a Phase 3 study in atypical hemolytic uremic syndrome (aHUS), with enrollment to commence come fourth quarter, as well as in two distinct Phase 2 trials in complement-related renal diseases and stem cell transplant-related thrombotic microangiopathies (TMAs).
From the analyst’s eyes, the firm “recently provided encouraging early results.” When considering the firm’s twice-daily PDE10 inhibitor, Omeros still looks for data from Pfizer before it plans to move forward with its own proprietary once-daily program in Huntingon’s disease as well as for cognitive disorders.
Additionally, “In 4Q16 and beyond, we could be surprised by potential announcements on licensing deal(s) or other advances of Omeros’ GPCR platform,” Piros concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Elemer Piros is ranked #909 out of 4,200 analysts. Piros has a 41% success rate and gains 4.8% in his annual returns. When rating OMER, Piros earns 2.8% in average profits on the stock.
TipRanks analytics indicate OMER as a Strong Buy. Out of 5 analysts polled by TipRanks, all 5 are bullish on Omeros stock. With a return potential of nearly 252%, the stock’s consensus target price stands at $41.80.