Biotech Beat: Analysts Bullish on ImmunoCellular Therapeutics Ltd (IMUC) and Valeant Pharmaceuticals Intl Inc (VRX)

Although ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) does not have any approved drugs, Roth Capital remains bullish on its pipeline and impending Phase III trials of ICT-107 for brain cancer. Separately, Nomura remains bullish on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) despite recent accusations of fraud and price gauging.

ImmunoCellular Therapeutics Ltd

In light of third quarter earnings and the ICT-107 Phase III trial, Joseph Pantginis of Roth Capital reiterated a Buy rating on ImmunoCellular Therapeutics with a $3 price target, marking an overwhelming 550% potential upside from the stock’s current levels of $0.46.

The analyst notes that the company posted third quarter earnings per share of $0.04, in-line with his estimate. However, all eyes are on the impending ICT-107 Phase III trial, as well as an expected data update on the second trial. ICT-107 is a pipeline immunotherapy drug for brain cancer to be used in combination with radiation and chemotherapy.  The impending Phase III study is now fully funded and should begin by the end of 2015 or early 2016. About 400 patients will take part in the study with the primary endpoint being overall survival.

Pantginis is looking forward to November 20, at which point the company will release data from the Phase II trial for ICT-107. The analyst notes that the pipeline therapy is the only drug that has been able to show “a positive benefit in unmethylated MGMT patients,” with MGMT being a specific gene associated with carcinogenic risk.

Joseph Pantginis has an overall 36% success rate recommending stocks with a 3.3% average loss per rating. According to TipRanks, Pantginis is the only analyst who has rated IMUC in the last 3 months.

Valeant Pharmaceuticals Intl Inc

Shares of Valeant have plummeted more than 50% since mid-October when the company was accused of accounting fraud and price gauging. Philidor, a specialty pharmaceutical company, was accused of operating within a network of “phantom captive pharmacies,” leaving Valeant as its only customer. Valeant has held many meetings to clear the air and recently cut all ties with Philidor.

In light of Valeant’s most recent update, analyst Shibani Malhotra of Nomura reiterated a Buy rating on the company, though lowered her price target from $220 to $175. Malhotra notes that although Valeant did not address all outstanding questions during its latest update, “management’s willingness to be as open as possible in its responses was a positive first step towards rebuilding credibility with investors.”

Malhotra’s new price target is more conservative than the company’s because she accounts for “operational disruptions” as the company begins rebuilding its specialty pharmaceutical network and sorts out pricing inconsistencies, as well as “longer-term reputational impact” and “potential employee attrition due to potential impacts to morale.” Although it is too early to determine how the recent accusation and disarray will impact Valeant in the future, Malhotra maintains that the business remains “significantly undervalued.”

The analyst warns that Valeant’s dermatology segment will experience negative near-term impact since it was closely tied to Philidor. Malhotra explains, “We note that while the $190mn of revenue that flowed through Philidor in 3Q15 represented just 6.8% of Valeant’s total sales, it was mostly driven by the Dermatology business and implies that approximately 40% of total segment revenue was generated through the channel.” However, management expects this to pass within 90 days as Valeant is working quickly to find new specialty pharmacies.

In the near-term, Valeant management is emphasizing “free cash flow… to reduce debt and leverage,” and Malhotra estimates that “Valeant will remain well within its maintenance debt covenants.” The analyst concludes, “While negative headlines could continue to weigh on the stock, our updated risk/reward analysis leaves us comfortable recommending VRX.”

Shibani Malhotra has a 78% overall success rate recommending stocks with a +20.6% average return per rating. According to the 18 analysts polled by TipRanks in the last 3 months, 12 are bullish on Valeant, 1 is bearish, and 5 are neutral. The average 12-month price target between these 18 analysts is $175.40, marking a 133.28% potential upside from where shares last closed.

VRX Consensus


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