A Bear Predicts: Valeant Pharmaceuticals Intl Inc (VRX) Is Going to Lower Its Expectations into 2018

Irina Rivkind Koffler warns VRX will face the brunt of various large scope headwinds.


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has a bear sounding off ahead of next Tuesday’s third quarter earnings betting that expectations for this year and next are skirting the brink of reduction.

Mizuho analyst Irina Rivkind Koffler is out predicting that this troubled biotech giant “needs to lower 2017 guidance and 2018 expectations,” and as such maintains an Underperform rating on VRX stock with a $7 price target, which represents a 38% decrease from current levels. (To watch Koffler’s track record, click here)

With the pharma giant setting a revenue guide for the year between $8.7 and $8.9 billion and adjusted EBITDA between $3.60 and $3.75 billion, the analyst finds that “we struggle to reach the bottom end” here, adding that the VRX management team should wind down their expectations.

For 2017, where FactSet consensus calls for $8.69 billion in revenues, the analyst falls below with a forecast of $8.58 billion, with consensus calling for $3.52 billion in adjusted EBITDA over the analyst’s estimate of $3.34 billion. In other words, “there is already some expectation of the guide-down,” asserts Koffler.

Glancing ahead into 2018, the analyst continues to be more bearish than the Street, with consensus looking for $8.49 billion in revenues and $3.52 billion in adjusted EBITDA against the analyst’s projections of $7.76 billion in revenues and $2.92 billion in adjusted EBITDA. Koffler says even if the guidance cut does not happen on Tuesday, she stands by the prediction: “we expect lowered numbers after the 3Q:17 call, even if mgmt. doesn’t discuss next year’s outlook.” However, the analyst acknowledges there is room to “get more constructive after expectations are reset and note that 3Q:17 should be otherwise fine.”

Valeant investors should get ready to face “a number of bigger picture headwinds for the stock,” as Koffler takes a page out of other peers’ earnings reports, setting expectations for the company’s consumer health segment (global consumer and vision care) to face some hot water. This is no small headwind either, as this business stands to bring in roughly a quarter of the giant’s revenues. Moreover, keep in mind this giant just faced bad news with its patent suit loss on Uceris, a product that stands over about $140 million in value, with Valeant baring the potential brunt of “generic entrants if it loses the appeal in 2018/2019,” underscores the analyst.

The future does not look bright for the company, as Koffler surmises with an eyebrow raised: “In 2H:18 we expect market entry of Cosmo’s Aemcolo, which may immediately take share from the expensive 200 mg. Xifaxan, and erode sales of the higher 550 mg dose. Dermatology continues to decline and the Siliq launch has been unimpressive. We pushed out dermatology pipeline launches to 2019 and expect Valeant’s revenue erosion to slow only in 2020 under a best case scenario (and already model significant cost cuts).”

Not all the Street’s voices have such an alarmed tone as Koffler’s in her perspective on the Israeli pharma giant’s woes, considering TipRanks analytics indicate VRX as a Hold. Based on 12 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Valeant stock, 6 maintain a Hold, while 3 issue a Sell on the stock. The 12-month average price target stands at $19.30, marking a nearly 62% upside from where the stock is currently trading.

  • To44ny

    The analist is Jewish not the company;-) Get your facts straight Julie!

  • simplicimuss

    Irina has a success rate of 47% ??!!! My financial adviser , “Penny”, averages 50% and it does not cost me a cent for it’s advice, and it does not spend any time on researching or on pontificating a lot of trumped up BS to look important. All I have to do is flip it. Heads..Buy ! Tails …Sell !! My portfolio is up 43 % YTD

  • VH

    Irina’s forecast has missed every quarter for the entire year, how is this useful? Isnt she putting the cart before the horse here? Valeant must guide lower to justify my $7 price target. Wow that’s rich. What about the vyzulta approval today? a potential 1B blockbuster drug that’s finally approved after years of fda delays. Or the submission of IDP118 to fda, another psoriasis drug from its extensive pipeline.

    With B+L growing at 6% and Salix at 26%, this is 85% of revs for the company. Siliq has had a solid start, as the best drug at the lowest price, it is winning its share of the 8B market. Irina continue to ignore the fact that her forecasts consistently lag behind the real numbers reported each quarter by the company.

    Valeant will make 2B+ in free cash flow this year, the market cap is less than 3.5B, and Irina thinks it should be even lower? Is she stupid or just nuts?