Close up of pills/drugs on US dollar
While Canadian drug maker Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced the return of Mike Pearson as CEO, biopharma firm Synergy Pharmaceuticals Inc (NASDAQ:SGYP) reported its fourth quarter and full year 2015 financial results. Analysts from brokerage firms Canaccord and Rodman & Renshaw weigh in on the implications of these announcements.
Valeant Pharmaceuticals Intl Inc
Valeant shares tumbled nearly 8% today following the news that the company has cancelled its conference call to discuss preliminary fourth-quarter results due to the return of Mike Pearson as CEO. Further, the company has withdrawn its 2016 financial guidance, provided back in December
In reaction, Canaccord analyst Neil Maruoka reiterated a Buy rating on shares of Valeant, while reducing the price target to $125 (from $170), which implies an upside of 69% from current levels.
Maruoka commented, “We believe that the return of Mr. Pearson is positive, particularly now that the company has split the roles of CEO and Chairman – an incremental step to improving corporate governance (Robert Ingram will take the lead Board position). Although we see a plethora of near-term risks for Valeant, our fundamental analysis suggests that the company’s valuation (either as a whole or sum-of-the-parts) is higher than where the stock is currently trading.”
“Although we have not made any adjustments to our estimates following the withdrawn 2016 guidance, we believe that concerns around managed care and Xifaxan present increased risks to our forecasts. To encapsulate these risks, we have increased our discount rate from 10.0% to 12.2% and have maintained our terminal growth rate of -1.0%. Based on this analysis, we are lowering our target,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Neil Maruoka has a total average return of -32% and a 16% success rate. Maruoka has a -34.5% average return when recommending VRX, and is ranked #3662 out of 3,741 analysts.
Out of the 17 analysts polled by TipRanks (in the past 3 months), 9 rate Valeant stock a Buy, 7 rate the stock a Hold and 1 recommend Sell. With a return potential of 102%, the stock’s consensus target price stands at $148.85.
Synergy Pharmaceuticals Inc
In a research report issued today, Rodman & Renshaw analyst Ram Selvaraju reiterated a Buy rating on shares of Synergy Pharma, while reducing the price target to $17 (from $20), after the company reported fourth-quarter financials and provided investors with an update on its regulatory and clinical progress.
Selvaraju noted, “The company closed the year with $111.8M in cash and equivalents, and reported R&D spending of $19.9M vs. our estimate of $19M and G&A spending of $7M vs. our estimate of $5.5M for the fourth quarter of 2015. The company also indicated that approximately $41M worth of senior convertible notes were converted into common stock over the course of 2015, resulting in the issuance of an additional 13.2M shares of common stock. In the wake of the reporting of the firm’s financial results, and in anticipation of the conversion of the remainder of the outstanding senior convertible notes over the course of 2016, we reiterate our Buy rating while modulating our 12-month price target from $20.00 to $17.00 per share to reflect the dilution from the conversion of the remaining outstanding notes.”
According to TipRanks.com, analyst Ram Selvaraju has a total average return of 0.5% and a 40.5% success rate. Selvaraju has a -24.6% average return when recommending SGYP, and is ranked #1564 out of 3682 analysts.