Analysts are weighing in on the controversial drug giant Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and biopharmaceutical company Relypsa Inc (NASDAQ:RLYP), as both stocks were extremely volatile today.
Valeant Pharmaceuticals Intl Inc
In a research report released today, Deutsche Bank analyst Gregg Gilbert reiterated a Hold rating on shares of Valeant Pharma, with a price target of $204, as the stock plunged following the release of an explosive note from Citron Research, implying that Valeant artificially inflates its revenue through its relationship with specialty pharmacies including Philidor and R&O.
Gilbert commented: “VRX shares have been under significant pressure, most recently following allegations related to its specialty pharmacy distribution model. While it is difficult to predict how more conservative pricing behavior and other potential changes could affect revenue growth, we thought it would be helpful to look at the sensitivity of our model to a lower growth scenario (see below). While we acknowledge that our current target implies significant upside if the company executes, we remain cautious on the stock given uncertainties related to the US drug pricing environment, VRX’s specialty pharmacy distribution model, and related government inquiries.”
Furthermore, “We have long been cautious about the risks associated with what had been a high-speed roll-up strategy. The bull case in the past had been tied in large part to the thematic appeal of the story and some investors’ strong desire to invest with CEO Mike Pearson. We suspect that new investors will focus not only on valuation but will want to take a very detailed approach in understanding the company on a bottoms-up basis, which could take some time. It will be important to see how the company and management team deal with a period of adversity after a long period of significant success.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gregg Gilbert has a total average return of 4.7% and a 50.0% success rate. Gilbert is ranked #1102 out of 3795 analysts.
Out of the 20 analysts polled by TipRanks, 14 rate Valeant stock a Buy, 5 rate the stock a Hold and 1 recommends a Sell. With a return potential of 136%, the stock’s consensus target price stands at $249.24.
Wedbush analyst Liana Moussatos reiterated an Outperform rating on shares of Relypsa, while raising the price target to $75 (from $66), after the FDA announced the approval of Relypsa’s Veltassa (patiromer) for the treatment of hyperkalemia. However, the stock closed down 27% in reaction to the restrictive label that came with the approval.
Moussatos commented: “We believe the box warning on the label indicating POTENTIAL drug-drug interactions is easily addressable, a minor issue, and does not impact our sales projections. We understand that the FDA put the box warning for a theoretical concern based on in vitro testing of about 28 drugs in which half bound to Veltassa—despite no clinical data suggesting that dosing of other meds had to be increased nor any clinically relevant impact related to drug-drug interactions.”
“Management stated that a survey of physicians indicated that between 95-98% of the addressable patient population take their current medications QD or BID, which would allow Veltassa to be dosed at night or mid-day. Relypsa has ongoing healthy volunteer drug-drug interaction studies that will test if there is a clinically meaningful drug-drug interaction and if there is, can the dose separation period be reduced from 6 to 3 hours. Relypsa expects to release results from this study in early 2016,” Moussatos continued.
According to TipRanks.com, analyst Liana Moussatos has a total average return of 12.4% and a 36.1% success rate. Moussatos has a -30.7% average return when recommending RLYP, and is ranked #259 out of 3795 analysts.
As of this writing, the 3 analysts polled by TipRanks in the last 3 months rate Relypsa stock a Buy. With a return potential of 366%, the stock’s consensus target price stands at $56.