Tim Chiang Stays Sidelined When It Comes to Valeant Pharmaceuticals Intl Inc’s (VRX) Recovery, but Sings the Praises of Bausch & Lomb Business

BTIG's Tim Chiang still spots challenges in VRX's orbit, but likewise pinpoints strength in eyecare business Bausch + Lomb, which boasts robust international gains.

After meeting with the Valeant Pharmaceuticals Intl Inc (NYSE:VRX) management team, BTIG analyst Tim Chiang is out with words of cautious optimism, noting that while the loss of exclusivities (LOEs) writing on the wall continues to threaten the biotech giant, the Bausch + Lomb eye care business looks to be the “strongest segment.”

Discussions with CFO Paul Herendeen and SVP of IR Art Shannon in Boston further highlight LOEs as the company’s “key headwind” that needs to be tackled, but with B+L looking “solid,” the analyst reiterates a Neutral rating on VRX stock without listing a price target. (To watch Chiang’s track record, click here)

Mostly, Chiang talked with Herendeen and Shannon about the giant’s three key segments: B+L and International, Branded Rx, and U.S. Diversified Products, diving into “[…] the Co.’s strategy in dealing with its debt position (which currently stands at ~$27B), and the potential growth drivers within several of its branded segments (namely B+L, Salix, and dermatology),” adding: “While we recognize the challenges VRX faces with the loss of exclusivities on a number of products […] we think an inflection point for the Co. could occur over the next 12 months, especially if new products like IDP-118 (topical lotion for the treatment of plaque psoriasis) gain approval.”

Worthy of note, Valeant’s plaque psoriasis lotion has a PDUFA date with destiny by June 18th of next year, where the FDA will decide whether or not to approve IDP-118.

With regard to Salix, Valeant continues to generate gains with Xifaxan (rifaxamin), designed to treat travelers’ diarrhea, irritable bowel syndrome with diarrhea (IBS-D), and to lessen the risk of patients with advanced liver disease suffering from hepatic encephalopathy. “While Xifaxan volume growth trends have slowed into the low single digits (3% YOY growth in 3Q17), the product has steadily gained NRx market share among primary care physicians,” Chiang writes.

Meanwhile, the analyst offers kudos to Bausch + Lomb, “[…] benefiting from its global presence, and new contact lens product offerings. We believe B+L / International (which makes up ~57% of total revenue) is likely to continue to generate growth in the mid-to-high single digits for the remainder of CY17 and for CY18, driven by strong international growth especially in China.”

On the heels of talks with management, the analyst maintains his revenue and EBITDA expectations for this year and next. For 2017, the analyst looks for Valeant to hit around $8.7 billion in revenue, dialing back to roughly $8.6 billion for next year, with forecasts for adjusted EBITDA to circle $3.6 billion this year and around $3.5 billion for 2018.

TipRanks data point to a biotech giant still making a comeback, with Wall Street consensus equally split between the bulls and the bears. Out of 13 analysts polled in the last 3 months, 3 are bullish on Valeant stock, 7 remain on the sidelines, while 3 are bearish on the stock. The 12-month average price target stands at $16.60, marking a nearly 4% downside from where the shares last closed.

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