Healthcare analysts are chiming in today on drug makers Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Celgene Corporation (NASDAQ:CELG). The analysts reflect on Valeant’s disappointing earnings and Celgene’s recent price hikes for Revlimid and Pomalyst. Let’s take a closer look.
Valeant Pharmaceuticals Intl Inc
Tuesday turned out to be a nightmare for shareholders of Valeant Pharmaceuticals, as the company’s shares lost over half of their value following earnings results that were far worse than expected. Mizuho top analyst Irina Rivkind Koffler chimed in on the news.
The analyst wrote, “Not only did VRX soundly miss on the bottom-line in 4Q and meaningfully lower its 2016 guidance by $1.5B, but we still have no visibility into 10-K filing timing. Business weakness is being attributed to GI channel disruption, transition to Walgreens from Philidor, and a lack of cost reductions to compensate for declining revenues. We think mgmt credibility is strained by the significant downward shift in guidance over such a brief two-month period, and highlights the uncertainties associated with the Walgreens agreement as well as unexpected softness in the gastroenterology franchise. More worrisome is the lack of visibility into the behind-the-scenes discussions with the trade. We expect significant weakness in the stock as a result.”
The analyst reiterated a Neutral rating on Valeant stock, with a price target of $70, which implies an upside of 107% from current levels.
According to data compiled by TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Irina Rivkind Koffler has a total average return of 33% and a 61.4% success rate. Koffler has a 32% average return when recommending VRX, and is ranked #7 out of 3726 analysts.
Out of the 25 analysts polled by TipRanks, 10 rate Valeant Pharmaceuticals stock a Buy, 12 rate the stock a Hold and 3 recommend to Sell. With a return potential of 241%, the stock’s consensus target price stands at $124.39.
Cowen analyst Eric Schmidt reiterated an Outperform rating on shares of Celgene, with a price target of $150, as third-party sources reported that Celgene increased the U.S. prices of both Revlimid and Pomalyst by 6.8%.
Schmidt noted, “The prior price hikes on Revlimid were 4% (October) and 3% (June) while Pomalyst’s price was increased by 4% (October) and 3% (June) last year. Revlimid’s pricing activity this early during the year have already surpassed the drug’s history of a roughly 6% per annum price increase.”
“We estimate these increases will contribute approximately $204MM to CELG’s top line and $0.21 to EPS in 2016. Trading at 18x 2016E EPS, we view CELG shares as attractive and expect the stock to outperform on upward earnings revisions,” the analyst added.
According to TipRanks.com, analyst Eric Schmidt has a total average return of 12.3% and a 37% success rate. Schmidt has a -0.8% average return when recommending CELG, and is ranked #280 out of 3726 analysts.
The overwhelmingly majority of experts say Celgene is a “buy.” The average forecast is for the stock to hit $149 in the coming months.