Valeant Pharmaceuticals Intl Inc (NYSE:VRX), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Endo International plc – Ordinary Shares (NASDAQ:ENDP) each beat expectations on Tuesday as earnings season continues to toll new releases. Analysts from Rodman & Renshaw, H.C. Wainwright, and Canaccord alike all find reason to see a break in the clouds and blue sky prospects for these three players. Yet, while one analyst remains confident in ACADIA, believing PDP and ADP drug Nuplazid is a viable contender to storm through the market, the other analysts still see reason to be neutral despite strengths shown this quarter from Valeant and Endo. Let’s take a closer look:
Is Valeant Out of the Woods?
Valeant shares were rising 5% yesterday after an already 24% acceleration, as investors continue to party following an encouraging first quarter showing. For Rodman & Renshaw analyst Ram Selvaraju, these “silver linings [are] apparent,” and he is excited to watch the troubled biotech giant turn around its woes. Cautious nonetheless, but optimistic, the analyst reiterates a Neutral rating on shares of VRX with a $17 price target, which represents a just under 35% increase from where the stock is currently trading.
For the first quarter of 2017, Valeant’s top-line of $2.11 billion came up short of the analyst’s expectations of $2.14 billion by a hair, marking an 11% dip from this time last year. However, the overwhelming positive lies in VRX’s adjusted EPS of $4.07, trouncing the analyst’s forecast of $1.27 per share, thanks to a one-time tax benefit to the tune of $908 million. Even better, the management team bumped up financial guidance, raising adjusted EBITA for the year from a range of $3.55 to $3.70 billion up to $3.60 to $3.75 billion. In light of this “gradual progress,” Selvaraju lifts his 2017 cash EPS projection a hefty amount, from $4.19 to $9.75t, with revenue remaining at $8.9 billion.
Catalysts appear to be on the giant’s side, considering “Valeant continues to anticipate formal approval of its next-gen glaucoma product, Vyzulta (latanoprostene bunod), which we view as a potentially best-in-class opportunity, by the revised PDUFA date of August 24, 2017,” the analyst opines.
Moreover, Selvaraju is banking on Bausch + Lomb to prove valuable to Valeant’s revenue, elaborating, “From our perspective, while recent product approvals may not accelerate revenue meaningfully, Vyzulta constitutes a key future franchise and should be able to take market share from existing products like latanoprost—formerly Xalatan from Pfizer (PFE; not rated), available generically since 2011, in glaucoma”
“While we acknowledge that the company is far from being out of the woods yet, we would quote Winston Churchill: ‘This is not the end; it is not even the beginning of the end. But it is, perhaps, the end of the beginning.’ From our vantage point, the laborious process of turning Valeant around appears well under way, and we look forward to potential further progress in the second half of the year and in 2018,” contends Selvaraju.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Ram Selvaraju is ranked #4,462 out of 4,564 analysts. Selvaraju has a 35% success rate and loses 6.5% in his annual returns. However, when recommending VRX, Selvaraju gains 1.1% in average profits on the stock.
TipRanks analytics show VRX as a Hold. Out of 14 analysts polled by TipRanks in the last 3 months, 2 are bullish on Valeant stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of 13%, the stock’s consensus target price stands at $14.33.
ACADIA’s Nuplazid Carries Potential for Long-Term Value Creation
ACADIA’s first quarter for the year turned a Nuplazid revenue beat in hand for Nuplazid in the indication of Parkinson’s disease psychosis (PDP). H.C. Wainwright analyst Andrew Fein believes PDP is just one valuable piece of the puzzle. As the Nuplazid pipeline develops, the analyst keeps his eyes on the Alzheimer’s disease psychosis (ADP) space, backing conviction in the firm’s strong pipeline.
Nonetheless, shares fell 10%, perhaps with investors apprehensive on rising expenses amid clinical trial progression. Unfazed by investor sentiment and bullish on Acadia’s bigger picture, the analyst reiterates a Buy rating on ACAD with a price target of $60, which represents a 106% increase from where the shares last closed.
“Nuplazid is more than the sum of its parts. […] We continue to believe that PDP is only a prized fraction of the Nuplazid narrative. As the Nuplazid pipeline begins to roll to maturation with multiple ongoing trials, we believe this timing and quick acceleration of early programs might serve a more near-term goal, in addition to its potential for longer-term value creation; namely, elevating the value of the company from an acquirer’s perspective. Notably, Alzheimer’s disease psychosis (ADP) trial is expected to enter Phase 3 development in 2H17, and Phase 2 studies in schizophrenia with inadequate response to current antipsychotic therapy, in negative symptoms of schizophrenia, and in major depressive disorders have already begun. At current levels, we see limited reflection of this longer-term value […],” Fein surmises.
For the first quarter, ACAD posted $15.3 million in sales, $35.4 million in R&D expenses, and $65.7 million in SG&A costs, which lead to a quarterly net loss of $0.45 per shares. Acadia kicked off the quarter with $469.5 million in cash flow.
According to TipRanks, four-star analyst Andrew Fein is ranked #610 out of 4,564 analysts. Fein has a 49% success rate and earns 7.9% in his yearly returns. However, when recommending ACAD, Fein forfeits 11.0% in average profits on the stock.
TipRanks analytics indicate ACAD as a Strong Buy. Based on 3 analysts polled by TipRanks in the last 3 months, all 3 rate a Buy on ACAD stock. The 12-month average price target stands at $52.00, marking a nearly 79% upside from where the stock is currently trading.
Endo Outclasses with Generics Beat
After Endo’s first quarter results for the year, Canaccord analyst Dewey Steadman comments from the sidelines, but finds the performance “solid,” eager to spot new glimmers of promise in generics. However, mesh settlements persist as short-term hang-ups, leaving the analyst reiterating a Hold rating on shares of ENDP with a $14 price target, which represents a close to 15% increase from current levels.
For the first quarter, Endo brought in $1.038 billion in revenue, showing 8% in year-over-year growth, outperforming the analyst’s expectations for $1.01 billion as well as FactSet consensus of $1.02 billion. EBITDA shot in at $478mm, rising above both the analyst’s forecast of $431mm and FactSet consensus of $427mm. US Generics were best of all for the firm, rising 24% year-over-year this year to $722 mm, well above both the analyst’s estimate of $687mm and consensus of $703mm. Endo maintained guidance for adjusted EPS from $3.45 to $3.75, revenue for $3.45 billion to $3.60 billion, and adjusted EBITDA for $1.50 billion to $1.58 billion, while increasing adjusted gross margins up from 62.0% to 63.0% up to 62.5% to 63.5%. Meanwhile, the ENDP team also increased adjusted interest expense from $470mm to $480mm up to $490 to $500mm.
While reaffirmed commitment to the Xiaflex franchise is a strong move forward for the firm from Steadman’s eyes, he explains, “Endo’s recent debt refi gives the company some debt breathing room, but we see cash outflow pressures from ongoing mesh settlements continue to hamper near-term flexibility […]”
Elaborating on the mesh concern factor in the mix, the analyst underscores, “The mesh settlement maintains its place as an ongoing overhang to Endo’s share price given the uncertainty of exposure. While Endo guided to pay $442mm in substantiated liabilities by YE/17, ~10,500 unsubstantiated cases remain, and we’re not sure when the trickle may stop.”
Steadman concludes, “We believe the generics business is starting to build strength, think Xiaflex presents as an interesting long-term call option, and are encouraged with new management’s strategy and execution to focus the business and responsibly delever over time. Nevertheless, we believe the cash outflow and uncertainty over mesh limits Endo’s near-term business development options […]”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Dewey Steadman is ranked #3,619 analysts. Steadman has a 45% success rate and faces a loss of 2.4% in his annual returns. When recommending ENDP, Steadman yields 0.0% in average profits on the stock.
TipRanks analytics reveal ENDP as a Hold. Out of 7 analysts polled by TipRanks in the last 3 months, 1 is bullish on Endo stock while 6 remain sidelined. With a return potential of 19%, the stock’s consensus target price stands at $15.50.