Cantor analyst Louise Chen had the opportunity to discuss this morning with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) management regarding some concern that formulary changes could adversely impact VRX’s sales for certain products. Following the discussion, the analyst believes that these concerns are overdone and highlights three key reasons to own VRX’s stock now:

  1. “We think that Valeant can lower its debt to manageable levels in the medium term, but the Street is still overly concerned about Valeant’s high leverage ratio, in our view.”
  2. “For over a year, the noise level on Valeant’s news flow has been high. We think some potential investors have avoided the stock because of what may come next in the headlines. That said, the volume of media attention placed on Valeant as well as the negative headlines have diminished meaningfully, when compared to over a year ago.”
  3. “We think the Street is largely looking past some potential blockbuster drug opportunities for Valeant including Siliq/Brodalumab, Vyzulta, IDP-118 and Luminesse. We think the Street could start giving Valeant more credit for its new drugs as investors gain more confidence in the company’s ability to lower its debt level.”

Chen reiterates an Overweight rating on Valeant shares, with a price target of $23, which implies an upside of 35% from current levels. (To watch Chen’s track record, click here)

Out of the 15 analysts polled in the past three months, three are bullish on Valeant’s stock, nine are neutral, and three are bearish on VRX. With a return potential of nearly 2%, the stock’s consensus target price stands at $17.33.