Mizuho Analyst Criticizes Valeant Pharmaceuticals Intl Inc (VRX) and Relypsa Inc (RLYP); Here’s Why

As Valeant Pharmaceuticals Intl Inc (NYSE:VRX) continues to face legal battles on several fronts and Relypsa Inc (NASDAQ:RLYP) struggles to ramp sales of its new drug, Irina Rivkind Koffler of Mizuho explains why she remains bearish on both companies.

KofflerIrina Rivkind Koffler, a prominent healthcare analyst with Mizuho, is one of the top 20 analysts rated (out of 3,929 analysts) on TipRanks.

Valeant Pharmaceuticals Intl Inc

Koffler continues to be an outspoken critic of Valeant as the biotech company faces legal battles with both the SEC and a Congress. Last week, reports surfaced that Valeant rejected a joint takeover offer by Takeda, a Japanese pharmaceutical company. The analyst views such prospects as “remote” and continues to warn against Valeant, noting that Valeant’s assets do not “warrant a premium bid at this time.”

The analyst continues to explain that she does not think “large shareholders can part with the stock, even at a premium to current levels.” Koffler elaborates, “We aren’t surprised by a speculation of a potential offer given where the stock is trading, or that Takeda was primarily interested in Valeant’s Salix segment rather than the entire business.” Valeant purchased Salix Pharmaceuticals last year for $11 billion and is most known for Xifaxan, a treatment for Irritable Bowel Syndrome; one of Valeant’s top sellers.

Koffler is not surprised that Valeant rejected the offer, noting, “large shareholders and Valeant Board members are so far underwater on their positions that they may be resistant to a potential bid which may ‘undervalue’ the company.” She warns that this stubbornness may “frustrate risk-tolerant retail investors” and consequently result in a “hostile offer and protracted battle to dislodge the current Board, which most activists may find unattractive.”

Koffler reiterates an Underperform on Valeant with an $18 price target, marking a 36% downside.

According to TipRanks, 32% of analysts are bullish on Valeant, 50% are neutral, and 18% are bearish. The average 12-month price target is $47.79, marking a 68% potential upside from where shares last closed.

Relypsa Inc

Koffler continues to sounds the alarm on Relyspa, most known for Veltassa, used to treat hyperkalemia. Veltassa received positive coverage around its launch because it is the first drug in 50 years to be approved to treat hyperkalemia, though Koffler has been unimpressed by its slow launch and concerned by potential competition.

However, it looks like Relypsa had a lucky day last week as AstraZeneca received news that the FDA will have to delay ZS-9; a potential Veltassa competitor. Koffler notes that this delay was the “best possible” outcome for Relyspa as it gives Veltassa “more time to gain traction in the market as first-mover and increases the likelihood of takeout interest in the name.” However she continues, “We still view the Veltassa launch trajectory as quite slow and expect the stock to remain relatively range-bound until growth becomes more tangible.”

Koffler reiterates an Underperform on Relypsa with a $12 price target, marking a 33% potential downside, but notes that this price target will be re-evaluated after speaking with management.

According to TipRanks, 80% of analysts covering Relypsa are bullish on the stock, 10% are neutral, and 10% remain bearish. The average 12-month price target between these analysts is $31, marking a 72% potential upside from where shares last closed.



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