Valeant: Sidelined on Uncertainty, but Short-Term Set-Up is a Positive

Earlier this month, the rumor mill was clattering that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) could sell its GI unit Salix to the tune of approximately $10 billion.

Amid great uncertainty circling talks as to whether this rumor will come to fruition, Deutsche Bank analyst Gregg Gilbert reiterates a Hold rating on shares of VRX with a $24 price target, which represents a just under 39% increase from current levels.

The analyst believes, “On the surface, it is not a ‘no-brainer’ to sell what could be a growthy and durable business. But if VRX can fetch a price that would result in an improved debt situation, we can see why the company would do it, particularly as maximizing the value of Salix will likely require significant additional resources and management time. Our preliminary analysis suggests that a sale for $10bn coupled with de-levering would be significantly dilutive to earnings but could actually be accretive to value.”

Overall, “While we are sticking with our Hold rating, we continue to like the short-term set-up as 1) the bar for ‘16 has been lowered and new CFO Paul Herendeen thinks of guidance as a commitment, 2) we have moved into a period of enhanced transparency from the company, 3) management seems confident in its ability to sell some non-core assets soon, and 4) management is willing to sell a core asset if the price is right,” Gilbert concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Gregg Gilbert is ranked #3,961 out of 4,239 analysts. Gilbert has a 35% success rate and faces a loss of 5.8% in his annual returns. When recommending VRX, Gilbert earns 0.0% in average profits on the stock.

TipRanks analytics indicate VRX as a Hold. Out of 11 analysts polled in the last 3 months by TipRanks, 2 are bullish on Valeant stock, 7 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 28%, the stock’s consensus target price stands at $22.06.screen-shot-11-29-16-at-09-45-pm

Celgene: Potential 15% Upside for the Stock

Oppenheimer analyst Leah Rush Cann initiates coverage on Celgene Corporation (NASDAQ:CELG) with an Outperform rating and a $141 price target, which represents a nearly 15% increase from where the shares last closed.

Cann asserts, “We are initiating coverage of Celgene Corporation, a high-quality biotechnology company with exciting potential new products, with an Outperform rating. We estimate Celgene’s revenue will grow at a compound annual growth rate of 19% per year for the next five years, with product growth of 19.2% per year. Diluted GAAP earnings per share are estimated to grow at a CAGR of 31% over the next five years.”

As the company’s robust portfolio of commercial drugs continues to accelerate and as the biotech firm develops “an exciting near-term pipeline of experimental therapies in cancer and auto-immune disease,” Cann forecasts diluted GAAP EPS will increase at a compound annual growth rate of 31.1% throughout the next five years, with adjusted EPS projected to rise at the rate of 22.8%.

The analyst adds, “Expected volume increases are from established products continuing to gain higher market penetration through 2020.”

Moreover, looking ahead, “We estimate potential new product launches of currently experimental will contribute 210 basis points of growth to the CAGR for sales for the next five years, and specifically 3.35% in 2018, 2.89% in 2019, and 3.61% in 2020,” Cann contends.

TipRanks analytics show CELG as a Strong Buy. Based on 17 analysts polled in the last 3 months by TipRanks, 14 rate a Buy on CELG, while 3 maintain a Hold. The 12-month average price target stands at $142.27, marking a 16% upside from where the stock is currently trading.screen-shot-11-29-16-at-09-46-pm