The ups and downs of biotech companies cease to abate as analysts weigh in on Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Celgene Corporation (NASDAQ:CELG), and Sarepta Therapeutics Inc (NASDAQ:SRPT). All three biotech giants are in the headlines as Valeant showcases its new CEO, Celgene prepares for earnings, and Sarepta tries to recover after a disappointing FDA meeting.
Valeant Pharmaceuticals Intl Inc
Valeant has a new boss in town as the pharmaceutical company announced that Joe Papa will leave Perrigo to serve as the new CEO as early as next week. Irina Rivkind Koffler of Mizuho explains that Papa was chosen due to his industry experience, though the components of his compensation package have not yet been disclosed. Despite new management at the helm, Koffler still sees Valeant “as a troubled business because of generic erosion, slowing growth, and its significant $31B debt load.”
For the time being, Koffler is focusing on the company’s timely 10-K filing, scheduled for April 29. However, in the event that Mike Pearson, the outgoing CEO, is advised not to sign the 10-K, the company has already purchased extra time with its creditors. Koffler elaborates, “Because Mr. Papa’s term with Valeant does not begin until after April 29th, we do not rule out the possibility that he could also walk away from the position if Pearson does not sign off on the document.” Overall, the analyst warns, “failure to deliver the 10-K by Friday could lead to significant volatility in the stock.”
Koffler reiterates an Underperform rating on Valeant with an $18 price target, noting that “it is not clear” if new leadership will alleviate Valeant’s issues, which currently range from debt to fraud allegations to stagnating growth.
Koffler has a 54% success rate recommending stocks with a 27.3% average one-year return per rating.
According to TipRanks, 33% of analysts are bullish on the company, 48% are neutral, and 19% are bearish. The average 12-month price target is $49, marking a 35% potential upside.
Celgene will post first quarter earnings tomorrow, April 28, before market open. Brian Skorney of Baird expects the company to post US sales of $968 million, above the overall consensus of $952 million thanks to “ex-U.S. market share gains, modest pricing increases, and a potential incremental positive FX impact.” Skorney models ex-US sales of $617 million, compared to the overall consensus of $619 million, and non-GAAP EPS of $1.13, compared to estimates of $1.28.
Investors will be watching sales figures for both Otezla, a drug for active psoriatic arthritis and plaque psoriasis, and Pomalyst, for multiple myeloma. Skorney comments, “Following a 2014 launches for psoriasis and psoriatic arthritis, Otezla’s ramp has been exceptionally strong.” He expects the drug to continue “market share gains,” modeling Otezla US sales for $187 million, above the consensus of $167 million. He models ex-US Otezla sales at $23 million, compared to the estimate of $29 million. The analyst shares his estimates for Pomalyst, modeling, “$176M in the U.S. versus consensus of $175M, and $125M outside of the U.S. versus consensus of $117M.”
The analyst also points to Revlimid and Abraxane, noting that the former “stands strong” and the latter is “steady in the U.S.” Overall, Skorney notes that “Celgene continues to exhibit strong growth in the company’s hematology-oncology franchise, and we expect nothing less this quarter.”
Skorney reiterates an Outperform rating on Celgene ahead of earnings with a price target of $162, marking a 50% potential upside.
According to TipRanks, 92% of analysts covering the stock are bullish while 8% are cautious. The average 12-month price target is $141.75, marking a 32% potential upside.
Sarepta Therapeutics Inc
Sarepta shares have taken a beating, losing half their value in the last five days after the FDA Advisory Committee, or AdComm, voted against eteplirsen, a pipeline drug to treat Duchenne’s muscular dystrophy (DMD). Three FDA members voted in favor of the drug, 7 voted against, and 3 abstained. Following the AdComm meeting, William Blair analyst Tim Lugo weighs in on the biotech company, maintaining a Market Perform rating without providing a price target.
The FDA will rule on eteplirsen by May 26. While the FDA does not have to follow the recommendation of the AdComm, it normally does. Lugo was surprised the AdComm ruled against the drug, explaining, “We are actually surprised the vote was not more in favor of approval, as we believe the FDA was not compelling in its argument against approval or issued compelling support of its negative briefing documents. Near the end of the panel, [two FDA members] both made comments that could be interpreted as positive for an accelerated approval, which we believe again leaves the PDUFA date [May 26] open as an event that we could easily see lead to an accelerated approval or Complete Response Letter.”
Overall, the analyst believes there are reasons to be optimistic following the AdComm meeting, but remains on the sidelines because “the mixed voting results will likely delay significant stock outperformance or weakness until the May 26 PDUFA date.” He elaborates, “While we still see a positively skewed risk/reward for shares, we are somewhat disappointed in the mixed panel results after what we believed was an excellent argument by the company, despite the data limitations, and heart-wrenching pleas by patient groups.”
According to TipRanks, 25% of analysts covering the stock are bullish, 67% are neutral, and 8% are bearish. The average 12-month price target between these analysts is $16.67, marking a 51% potential upside.