Don’t Get Jittery on Valeant Pharmaceuticals Intl Inc Just Because of Prospective Cosmo Rivalry, Argues Louise Chen

Cantor's Louise Chen dismisses Valeant share weakness today, making a bullish case that the majority of Xifaxan's sales stem from IBS-D; not Traveler's Diarrhea.


What is sending Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares slipping almost 4% in trading today? New worries have sprung up circling rival Cosmo Pharmaceuticals posing a threat to the recovering biotech giant’sĀ diarrhea predominant Irritable Bowel Syndrome (IBS-D) asset Xifaxan come 2019.

Cantor analyst Louise Chen cheekily notes in a bullish note, “Don’t get an upset stomach over potential competition from Cosmo.”

Not seeing “fundamental reasons for the stock’s weakness this morning”, the analyst reiterates an Overweight rating on VRX with a $25 price target, which implies a 17% upside from current levels. (To watch Chen’s track record, click here)

“Cosmo expects to file for Traveler’s Diarrhea, which is an insignificant percentage of Xiafan’s ~$1B in annual sales. Most of Xifaxan’s sales come from IBS-D. Cosmo is only in Phase 2 studies for IBS-D,” asserts Chen.

The analyst likewise argues, “There has been some debate on off label usage of Cosmo’s drug. If Cosmo’s drug for Traveler’s Diarrhea is approved, it will not be widely used off-label for IBS-D, in our view. Payors will not reimburse for off label usage.”

Ultimately, “The only generic filer for Xifaxan is Teva,” writes Chen, who concludes: “The case is now off the docket since the FDA would not allow Teva to extrapolate from the 200mg dose to the 550mg dose. The majority of Xifaxan’s sales are for the 550mg dose. VRX is also waiting for a decision on Cosmo’s case for generic Uceris. There is no update on timing here.”

TipRanks shows investors are largely apprehensive and not ready to take the gamble on this comeback story. Based on 11 analysts polled in the last 3 months, only 2 are bullish on Valeant stock, leaving 5 on the sidelines and 4 bears running for the hills. With a loss potential of 16%, the stock’s consensus target price stands at $17.78.