Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has Canaccord worried after releasing 2017 financial guidance yesterday morning that came up short of already subdued expectations. The analyst is apprehensive on the sidelines, emphasizing the troubled biotech giant’s need to squash billions in debt by this year alone. Conversely, following ACADIA Pharmaceuticals Inc.’s (NASDAQ:ACAD) fourth-quarter print, H.C. Wainwright is teeming with anticipation and confidence ahead of Nuplazid’s commercial launch. Let’s explore:
Valeant’s Guidance Keeps Getting Lower
Canaccord analyst Neil Maruoka finds Valeant’s fourth-quarter performance, specifically its 2017 guidance, quite “disappointing,” anticipating guidance can even go further down from here throughout the next year. On back of escalating “leverage hurdles” coupled with dipping EBITDA, the analyst reiterates a Hold rating on VRX with a price target of $19, which represents a just under 35% increase from where the shares last closed.
For the fourth quarter, the giant did fare decently on revenue of $2.4 billion, which hit above the analyst’s projection of $2.3 billion, and adjusted EBITDA of $1.05 billion very closely mirrored both the analyst’s and the Street’s estimates. Meanwhile, adjusted EPS of $1.26 outclassed the analyst’s expectation of $1.16 and the Street’s of $1.22. However, the blatant shortcoming of the print comes down to guidance.
Maruoka explains, “Despite commentary on last quarter’s conference call that foreshadowed lower sequential full-year revenue and adjusted EBITDA in 2017, Valeant provided guidance for this year that was nonetheless below expectations. Moreover, as we realized near the end of today’s conference call, the impact from recent divestitures was not included in this guidance, suggesting that the range could be adjusted even lower over the course of the year as these acquisitions close.”
Moreover, “While we expect that current consensus estimates will be coming down substantially, Valeant’s new guidance still does not include an additional ~$135 million pro-rated 2017 EBITDA contribution from the sale of dermatology assets to L’Oreal and Dendreon,” warns the analyst.
From the analysts’ stance, it is clear the giant’s risks are still waiting in the wings, as he elaborates, “We believe that recent divestitures of derm assets (including CereVe) and Dendreon, while in line with Valeant’s strategy of maintaining core franchises, underscores the challenges of achieving asset sales multiples that can be accretive to leverage without giving up potential growth drivers.”
Overall, with the troubled biotech giant maintaining its projected $5 billion cut in debt by the first quarter of 2018, Maruoka spotlights all the more its “pressing need to de-lever;” particularly considering for VRX to meet its targeted expectations, the giant must scrap together another $2 billion in free cash flow and asset sales sometime during the next year.
TipRanks analytics indicate VRX as a Hold. Based on 12 analysts polled by TipRanks in the last 3 months, 1 rates a Buy on VRX stock, 8 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $17.09, marking a nearly 21% upside from where the stock is currently trading.
Upside Potential on ACADIA Ahead of Nuplazid Launch
H.C. Wainwright analyst Andrew Fein is chiming in on ACADIA after the biotech firm reported fourth-quarter financials yesterday while providing investors with an update on its regulatory and clinical progress. With a new surge in optimism on Nuplazid’s commercial potential ahead of its first full year of sales revenue, the analyst reiterates a Buy rating on shares of ACAD with a $60 price target, which represents a 63% increase from current levels.
With compelling value in the indication of Parkinson’s disease psychosis (PDP) as well as prospective opportunity to be a player in central nervous system (CNS) disorders, which the analyst cheers for its “broad-indication,” ACADIA seems to be on solid footing at the close of its fourth quarter. Fein underscores, “On yesterday’s earning’s call, the major overarching theme was management’s efforts in expanding the commercial and clinical reach of Nuplazid both within the approved Parkinson’s disease psychosis indication, as well as beyond PDP, to 5 other related CNS indications.
Specifically, the analyst looks to the following CNS indications: Phase 3 in Alzheimer’s disease psychosis, with a trial set to initiate by the end of 2017 and more detailed Phase 2 top-line data due by the second half of the year, Phase 2 in Alzheimer’s disease agitation, Phase 3 in schizophrenia, Phase 2 in schizophrenia patients with inadequate response to current antipsychotic therapy, Phase 2 in negative symptoms of schizophrenia, as well as Phase 2 in major depressive disorder.
“We view these clinical add-on’s as highly valuable to the Nuplazid pipeline: not only as increased shots-on-goal as indication optionality for the company, but more importantly, as building a value package for the Nuplazid as a potential CNS drug for any potential M&A onlookers. Supported by a strong launch effort in PDP […] we continue to see upside potential in the year ahead […]” Fein surmises.
Having generated $12 million in sales during its fourth quarter, Nuplazid earned total revenue of $17.3 million for ACADIA in the financial year of 2016. For the fourth quarter, ACADIA posted a net loss of $0.65 per share. Additionally, the firm has commenced 2017 with $529 million in cash and equivalents.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Andrew Fein is ranked #797 out of 4,503 analysts. Fein has a 49% success rate and gains 5.6% in his annual returns. When recommending ACAD, Fein earns 5.5% in average profits on the stock.
TipRanks analytics demonstrate ACAD as a Strong Buy. Out of 5 analysts polled by TipRanks in the last 3 months, all 5 are bullish on ACADIA stock. With a return potential of 22%, the stock’s consensus target price stands at $45.00.