Valeant May Post Weak 2Q Print- But Might Not Dent Investor Sentiment After All

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) delivers its second-quarter print tomorrow before the bell and all eyes will be on management to see if outlook remains safe- and if results fail to impress, whether that will send the Street running in the opposite direction.

Mizuho analyst Irina Rivkind Koffler for one cannot help feeling apprehensive ahead of so many mixed variables at play.

Even though the stock had seen a recent surge in June, a peak high not seen in four months, the analyst believes the fundamentals continue to be rocky. However, the analyst would not be shocked to see a rise following the roll of the earnings dice, particularly in the aftershock of Teva’s implosion just a week prior.

“We are cautious heading into the Aug 8 print for VRX because it is unclear whether mgmt. will lower guidance and also whether even weak results may be unexpectedly well received,” explains Koffler.

Even though the analyst assesses slight “short-term risk” to her bearish perspective, she is not budging from the bears quite yet, maintaining an Underperform rating on VRX with an $8 price target, which represents a 47% downside from where the shares last closed. (To watch Koffler’s track record, click here.)

For the second quarter, the analyst projects revenues to hit $2.29 billion and non-GAAP EPS of $0.94, compared to FactSet consensus expectations looking for $2.23 billion in revenue and $0.94 in non-GAAP EPS. While the analyst has reigned in 2017 revenue projections, she considers her sales forecasts as “relatively generous,” still not ruling out a top-line miss against consensus could be forthcoming. When glancing at the bottom line, the analyst pulled spending expectations under outlook ranges, underscoring that consensus expectations likewise linger at or under the low end.

Koffler surmises, “During the quarter mgmt. issued information on revenue and EBITDA losses related to three divestitures (iNova, Dendreon, and Obagi), which implies that mgmt. is contemplating lowering guidance.However, the iNova and Obagi transactions haven’t closed yet and we therefore worry that the company could hold the line until later in the year, which would be a negative to our Underperform thesis in the short-term. The stock has rallied on debt repayment news but not much has changed in the underlying business, so we think a correction is likely. On the other hand, a ‘not that bad’ quarter could have an unexpectedly positive effect on the stock after the blow up in TEVA last week.”

TipRanks analytics showcase VRX as a Hold. Out of 15 analysts polled by TipRanks in the last 3 months, 3 are bullish on Valeant stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of 11%, the stock’s consensus target price stands at $16.85.

Don’t Worry About the PDUFA Slowdown- Dynavax Still One for the Bulls

Dynavax Technologies Corporation (NASDAQ:DVAX) may have suffered a slight setback with the FDA extending the PDUFA date for the biotech firm’s Hepatitis B vaccine candidate Heplisav. Now, the firm will have to wait to find out November 10th whether the FDA will smile upon DVAX, instead of the original date with agency destiny set for this Thursday. Investors retreated and sent shares on a roughly 3% dip Friday in reaction to the extension.

Yet, William Blair analyst Y Katherine Xu remains bullish as ever on the stock, from chances to approval to commercial prospects down the line, sizing up the delay as merely a short-term push-back- not a long-term pitfall.

Therefore, the analyst reiterates an Outperform rating on shares of DVAX with a $30 fair value estimate, which implies a just under 77% upside from current levels. (To watch Xu’s track record, click here.)

Xu highlights, “[…] the PDUFA for Heplisav is to be extended by up to three months to November 10, as the company and the FDA need more time to finalize the post-marketing study design. The temporary delay in PDUFA does not impact our outlook on Heplisav, including its eventual approval, the prospect of establishing a commercial partnership, and peak sales estimate. […] The FDA issued an information request today regarding the post-marketing study, resulting in the PDUFA extension, and the key elements to address include: timeline for the final protocol submission, study completion and final report submission; timeliness of accruing patients into the study; time points for data review; measures to control for potential biases between study arms; and updated statistical analysis plan. We believe these topics reflected the concerns expressed at the VRBPAC panel, and that addressing these topics appropriately would ensure timely and responsible conduct of the study.”

TipRanks analytics demonstrate DVAX as a Strong Buy. Based on 4 analysts polled by TipRanks in the last 3 months, all 4 are bullish on Dynavax stock. The 12-month average price target stands at $28.67, marking a 73% upside from where the stock is currently trading.