Valeant Pharmaceuticals Intl Inc (VRX) Gets a Price Target Trim on Uncertainty Circling Legal Liabilities

Deutsche Bank's Gregg Gilbert is concerned about the unpredictability of VRX's legal hurdles that lie ahead.


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) may have impressed some on the Street with its third quarter beat that surpassed Street-wide expectations, but one cautious expert, while optimistic, worries what will come of the troubled giant’s legal contentions down the road.

Deutsche Bank analyst Gregg Gilbert recognizes Valeant has come a long way under fresh leadership. However, even with a better risk/reward, the analyst cannot help keeping his eyes peeled to apprehension for legal challenges that continue to haunt the company.

As such, the analyst reiterates a Hold rating while narrowing the price target from $19 to $18, which represents a close to 23% increase from current levels. (To watch Gilbert’s track record, click here)

Ultimately, “VRX has undergone significant change under the new management team, which we applaud for managing near-term debt maturities, returning the core franchises (Salix, Bausch+Lomb / International) to growth, and resolving some legacy legal issues. While we stick with a Hold based on uncertainties around the growth potential and duration of Xifaxan and other franchises, medium-term debt maturities, potential impact of US tax reform, and the potential cost of past sins, we note an improving risk/reward for the stock as VRX continues to deliver on its financial expectations and proactively manage its debt load. While we cannot predict the timing or magnitude of liabilities stemming from ongoing investigations and lawsuits, we now include $500mn as a preliminary assumption (vs. none previously),” Gilbert surmises.

The majority of the Street sides with the Deutsche Bank analyst’s cautious take on the beleaguered biotech player, as TipRanks analytics demonstrate VRX as a Hold. Out of 14 analysts polled by TipRanks in the last 3 months, 4 are bullish on Valeant stock, 7 remain sidelined, while 3 are bearish on the stock. With a return potential of 30%, the stock’s consensus target price stands at $19.18.