Nomura Weighs In on Valeant Pharmaceuticals Intl Inc (VRX) and Mallinckrodt PLC (MNK) Ahead of Earnings; Reiterates Mixed Ratings

As we head into 4Q15 earnings with the biotech sector, Nomura’s healthcare analyst Shibani Malhotra weighed in today on a handful of biotechnology stocks. Among the equities in focus are controversial drug giant Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and specialist pharmaceutical firm Mallinckrodt PLC (NYSE:MNK).

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Shibani Malhotra has a yearly average return of 13.4% and a 53% success rate. Malhotra is ranked #319 out of 3622 analysts.

Valeant Pharmaceuticals Intl Inc

Malhotra reiterated a Buy rating on shares of Valeant, with a price target of $175, which represents a potential upside of 82% from where the stock is currently trading. The analyst believes that Valeant’s upcoming earnings results are likely to be in line with updated 4Q15 guidance provided at recent investor day.

Malhotra wrote, “We continue to expect solid performance across key franchises, given Valeant’s decentralized operating model and excellent team of general managers that run individual business units. We also highlight that near-term potential pipeline approvals including brodalumab and oral Relistor offer significant potential upside to guidance and our estimates and we believe Valeant’s pipeline provides an underappreciated call option at current levels. Net, we look for improving underlying fundamental performance throughout 2016, which we expect to drive VRX shares higher.”

“We have made minor adjustments to our model to reflect prescription trends, but our 4Q15E and 2015E EPS remain $2.59 and $10.33 respectively, and we remind investors that management recently confirmed 4Q15 guidance for revenues of $2.7bn-$2.8bn to drive EPS of $2.55-$2.65,” the analyst added.

Out of the 19 analysts polled by TipRanks in the last 3 months, 10 rate Valeant stock a Buy, while 9 rate the stock a Hold. With a return potential of nearly 62%, the stock’s consensus target price stands at $155.56.

Mallinckrodt PLC

In addition, Malhotra reiterated a Neutral rating on shares of Mallinckrodt, with a price target of $100, as the next key milestone for the company will be its first quarter fiscal 2016 results on Tuesday, Feb. 2, 2016.

“We remain Neutral on Mallinckrodt, as we continue to be cautious regarding the sustainability of the growth reacceleration for key franchises. While Acthar generated better-than-expected growth in F4Q15 and Ofirmev Symphony volume trends were slightly better than our expectations in F1Q16, we remain cautious regarding the sustainability of this growth given payer and customer pushback on both products. Further, while expectations for the Specialty Generics business appear to have been reset, Mallinckrodt’s Methylphendiate ER market share continues to erode and we do not expect significant new launches to bolster the business near term,” Malhotra said.

The analyst continued, “We increase our F1Q16E EPS to $1.79 from $1.76, driven primarily by management’s recent comments that Mallinckrodt repurchased debt and completed modest share buy backs in the quarter. We expect the resulting reduction in interest expense and share count to be modestly accretive in F1Q16 and FY16.”

As of this writing, out of the 14 analysts polled by TipRanks, 10 rate Mallinckrodt stock a Buy, while 4 rate the stock a Hold. With a return potential of 69%, the stock’s consensus target price stands at $105.93.


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