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Healthcare analysts from Mizuho and Rodman and Renshow explain their views on recent announcements made by Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Synergy Pharmaceuticals Inc (NASDAQ:SGYP). One analyst cites catalysts for Synergy such as an accelerated note conversion and upcoming pipeline data. The other sings a different tune on Valeant, unclear of the company’s future amid management changes and stalled growth.
Valeant Pharmaceuticals Intl Inc
Analyst Irina Rivkind Koffler of Mizuho commented on Valeant following news of this morning’s news of CEO Michael Pearson’s departure. The analyst cites an unclear future for the company amid share volatility and management changes.
The analyst states, “Valeant is parting ways with Michael Pearson, while working to push out former CFO Howard Schiller from its Board. Additionally, Pershing’s Bill Ackman has joined the Valeant Board, in exchange for Katharine Stevenson, who is stepping down. We learned that internal controls over financial reporting and disclosure controls and procedures were not effective as of Dec 31, 2014. This may provide some additional explanation for the unexpected resignation of Howard Schiller last year. With the exception of a few pockets of growth like Xifaxan, consumer and contact lens, we continue to view Valeant’s collection of assets as weak and eroding, and do not expect a new management team to return the business to growth. Selling the franchises may prove less lucrative than expected as well, in our view.”
Koffler also comments on the company’s “encouraging move” regarding its commitment to filling its 10-K before April 29. She states, “While this move may avert defaults and mitigate that risk, we expect continued investor concerns around risk disclosures and investigations.”
The analyst reiterated an Underperform rating on the stock and price target of $18.
Irina Rivkind Koffler is ranked #14 out of 3,820 analysts on TipRanks. She has a 53% success rate recommending stocks with an average return of 28.4% per recommendation.
According to TipRanks, out of the 21 analysts who have rated the company in the past 3 months, 7 gave a Buy rating, 4 gave a Sell rating, and 10 remain on the sidelines. The average 12-month price target for the stock is $55.73, marking an 87% upside from where shares last closed.
Synergy Pharmaceuticals Inc
Analyst Ram Selvaraju of Rodman & Renshaw weighed in on Synergy Pharmaceuticals following recent announcements. The analyst comments on company’s offer to certain holders of its 7.50% senior convertible notes into common stock. He believes this was a positive move which will improve the balance sheet. He explains, “Per the transaction, roughly $71.5M in aggregate principal amount of the notes will remain outstanding. Investors should take account of the fact that the accelerated note conversion…should save Synergy roughly $24.2M in future interest payments projected over the life of the notes, thereby conserving cash.”
The analyst also mentions upcoming events as catalysts for the stock. First, he expects the FDA to issue a formal notification of acceptance for its NDA for placentide, involved in treating constipation, in late March, with an approval decision expected in 2017. He also believes the company will release phase 3 data for trials of the drug in IBS-C and for second candidate dolcanatide at the Digestive Disease Week conference in May of this year.
The analyst comments on the potential launch of plecanatide. He states, “We anticipate that Synergy may begin making preparations for the formal U.S. launch of plecanatide later this year, which should include the establishment of a proprietary sales force targeting gastroenterologists.” Selvaraju compares the success of Ironweood Pharmaceutical’s linaclotide, similar to plecanatide, is a good sign for Synergy. He explains, “We believe that linaclotide’s attainment of $450M in 2015 sales and the long-term projections by Ironwood Pharmaceuticals (IRWD; not rated) for linaclotide to reach $1B in net sales by 2020 bode well for the commercial future of plecanatide.” He continues, ”We continue to consider Synergy undervalued relative to the implied market value of the linaclotide franchise, which we estimate at an amount approaching $3B based on the current enterprise value of Ironwood.”
The analyst reiterated a Buy rating while modulating his 12-month price target from $17.00 to $16.00 per share to reflect the share dilution from this conversion transaction.
According to TipRanks, Ram Selvaraju has a 39% success rate recommending stocks with an average return loss of (0.8%) per recommendation. Both analysts who have rated the company in the past 3 months gave a Buy rating. The average 12-month price target for the stock is $14, marking a 388% upside from where shares last closed.