Analysts Wary on Valeant Pharmaceuticals Intl Inc (VRX) as Salespeople Flee, Bullish on Sarepta Therapeutics Inc (SRPT) Cash Flow Prospects


Wells Fargo and Needham are chiming in with mixed takes on biotech companies Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Sarepta Therapeutics Inc (NASDAQ:SRPT). One analyst is investigating rumblings that over 50 of Valeant’s GI salespeople have switched loyalties to the side of its competitor,¬†Synergy Pharmaceuticals Inc (NASAQ: SGYP), believing this does not bear positive tidings for the giant. Conversely, another analyst is confident on Sarepta following the announcement of a multi-million dollar PRV agreement, even if he believes it could have brought in¬†even more funds. Let’s take a closer look:

Valeant Loses Out in Bulk on its Sales Workforce to Synergy

Wells Fargo analyst David Maris is skeptical on Valeant after rumors have been swirling that 50 plus of the biotech giant’s gastrointestinal (GI) salespeople have fled “en masse” to join the ranks of rival Synergy. The dangling carrot inciting the grand departure? SGYP’s drug pipeline just received the greenlight from the FDA on January 19th for the treatment of chronic idiopathic constipation (CIC).

The analyst reiterates an Underperform rating on VRX with an $11.50 price target, which represents a just under 30% increase from where the shares last closed.

After speaking with VRX regarding the latest news running through the grapevine and whether it is true, Maris opines, “Valeant indicated that a number of salespeople have left but would not confirm how many. Valeant went further to explain that it is not uncommon for salespeople to accept offers from another drug company contingent on approval of a drug, and when the drug is approved, they leave.”

Additionally, “We reached out to Synergy Pharmaceuticals which would only comment that it has been very successful in hiring a large number of experienced salespeople, many with 10+ years in GI sales,” continues the analyst.

Ultimately, “We think if Valeant did lose approximately 50+ salespeople it may be another setback to the Salix/GI salesforce and one that Valeant cannot afford given recent prescription trends on Xifaxan and the overall GI franchise, which have shown weakness,” Maris contends.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst David Maris is ranked #1,742 out of 4,496 analysts. Maris has a 42% success rate and gains 3.7% in his annual returns. When recommending VRX, Maris garners 34.0% in average profits on the stock.

TipRanks analytics exhibit VRX as a Hold. Out of 11 analysts polled by TipRanks in the last 3 months, 1 is bullish on Valeant stock, 7 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $17.60.

Sarepta’s PRV Deal a Step Towards Generating Positive Cash Flow

Sarepta shares were rising almost 6% yesterday after the biotech firm broke the news that it will sell its Rare Pediatric Disease Priority Review Voucher (PRV) to Gilead Sciences, Inc. (NASDAQ:GILD) in a $125 million deal.

Needham analyst Chad Messer is bullish on the deal, as he believes it will offer just the financial boost Sarepta needs to attain positive cash flow. However, Messer had hopes for a price tag beyond $125 million, and thinks the deal could have brought in even more advantageous funds. In reaction, the analyst reiterates a Buy rating while cutting the price target from $81 to $78, which represents a close to 157% increase from where the shares last closed.

“We expected the PRV would fetch a higher price, closer to $300M or more based on the sale price of the last two rare pediatric PRVs ($245M in May 2015 and $350M in August 2015). Sarepta sold the voucher through an auction-like process, implying that the market value for PRVs has softened. While the lower sales price leads to our modest price target reduction (to $78 from $81), we believe the more important outcome is that Sarepta should now have sufficient cash to reach positive cash flow from Exondys sales even if it sees more sluggish growth than we anticipate in 2017,” Messer concludes.

According to TipRanks, three-star analyst Chad Messer is ranked #1,645 out of 4,494 analysts. Messer has a 42% success rate and realizes 2.9% in his yearly returns. When suggesting SRPT, Messer yields 11.4% in average profits on the stock.

TipRanks analytics demonstrate Sarepta as a Buy. Based on 12 analysts polled by TipRanks in the last 3 months, 8 rate a Buy on SRPT stock while 4 maintain a Hold. The 12-month average price target stands at $62.82, marking a nearly 107% upside from where the stock is currently trading.