Valeant Pharmaceuticals Intl Inc’s (VRX) Situation Remains Dire: Irina Rivkind Koffler

Is Valeant on track to overcome financial troubles? Mizuho's Irina Rivkind Koffler remains unconvinced.


It doesn’t take much to send shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) higher these days, as today’s response to earnings demonstrates. The drug maker reported $2.22 billion in revenues and ~$1.05 non-GAAP EPS beating consensus estimates of $2.16 billion and $0.90, respectively. However, the company has lowered 2017 revenue guidance and posted weak performance in the company’s stronger segments.

Mizuho Securities analyst Irina Rivkind Koffler commented, “The business situation remains dire, in our view: (1) Branded Rx sales were down 17.3% Y/Y while B&L grew less than 1%. (2) Weaker than expected sales of Dermatology (-33.6% Y/Y), with nothing reported for Siliq. This business is not getting turned around, in our view. (3) We think there was another inventory fill of Xifaxan (+3.7% Y/Y) after last year’s hospital load-in; (4) Mgmt. lowered 2017 revenue guidance to $8.65B-$8.80B from $8.7B-$8.9B while maintaining prior EBITDA guidance of $3.6B-$3.75B (but this may be construed positively). 2018 consensus estimates are still too high, in our view.”

As such, Koffler reiterates an Underperform rating on Valeant shares, with a price target of $7.00, which implies a downside of 50% from current levels. (To watch Koffler’s track record, click here)

Valeant CEO Joseph C. Papa said, “Our strong third-quarter performance demonstrates our continued progress in the turnaround of Valeant. Driven by solid execution in our Bausch + Lomb/International segment and our Salix business, we delivered strong organic revenue growth1 across approximately 77% of our business in the quarter […] Valeant is a very different company today than it was a year ago. Under a new management team, we have strengthened our balance sheet and stabilized the Company by simplifying our business and allocating resources more efficiently. We realize there is more progress to be made, and we will continue to hold ourselves accountable for delivering on our commitments to best serve our shareholders, employees, customers, and most importantly, patients.”

Overall, Wall Street believes it’s smart to play it safe when it comes to the drug maker’s prospects ahead, as TipRanks analytics reveal VRX as a Hold. Out of 13 analysts polled in the last 3 months, 3 are bullish on Valeant stock, 7 remain sidelined, and 3 are bearish on the stock. With a loss potential of nearly 61%, the stock’s consensus target price stands at $19.36.