Valeant Pharmaceuticals Intl Inc (VRX) Moves Forward as cGMP Concerns Resolved, Teva Pharmaceutical Industries Ltd’s (ADR) (TEVA) Price Target Slashed at Mizuho

Two Pharmaceutical Companies that Have Recently Found Themselves in Hot Water Look for Relief


FDA Upgrades Valeant’s Troubled Tampa Plant to VAI; Stifel Weighs in

Last week, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) provided an update stating that the FDA has confirmed that it will issue a Voluntary Action Indicated (VAI) inspection classification for its manufacturing facility in Tampa, FL. With this confirmation, manufacturing uncertainties related to current and upcoming regulatory submissions will be eliminated for products manufactured at the facility. Recall earlier this month, Valeant received a CRL for its latanoprostene bunod NDA citing concerns with current cGMP inspection of Tampa facility.

Stifel Nicolaus analyst Annabel Samimy commented, “This resolution and VAI should eliminate manufacturing uncertainties related to current and upcoming regulatory submissions that are manufactured at the B+L facility. A VAI is defined as occurring when objectionable conditions/practices are observed but do not meet the threshold of regulatory significance and tend to be more technical violations. Thus, as the concerns were largely technical per VAI definition, we would expect a Class 1 review upon resubmission (two month review). The FDA has separately approved VRX’s sNDA for the Tampa facility to be a release testing facility for Alaway 0.035% (antihistamine eye drops) drug substance—a testament to the readiness of the facility.”

“We are comforted by this quick turnaround as well as the subsequent submission of a response to the CRL last week. If approved, the product should aid in the stabilization of the Ophthalmology Rx franchise. We also note that VRX is awaiting FDA action on Luminesse (PDUFA 12/27/2017), a topical vasoconstrictor to be used as an OTC eye-drop for redness, which is also manufactured at the Tampa facility,” the analyst added.

Samimy reiterated a Buy rating on shares of Valeant, with a price target of $45, which implies an upside of 212% from current levels. (To watch Samimy’s track record, click here)

Out of the 13 analysts polled in the past 3 months, 3 rate Valeant stock a Buy, 7 rate the stock a Hold and 3 recommend a Sell. With a return potential of nearly 24%, the stock’s consensus target price stands at $17.92.

Is Teva Pharmaceutical Beyond Repair?

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) stock has taken a 46% hit since the beginning of August, reaching the lowest point since 2002. Pondering whether the pharmaceutical giant has what it takes to recover, analyst Irina Rivkind Koffler of Mizuho believes it might be too late. Citing a number of factors, including the company’s mammoth debt, drug generics among a number of other metrics, Koffler sees a bleak future for Teva.

While reiterating a Neutral rating, Koffler is slashing her price target on TEVA stock from $30.00 to $16.00 representing a 6% dip below current trading levels. (To watch Koffler’s track record, click here)

Noting the possibility of short term band-aid fix, the analyst opines that the company may struggle to “patch together a combination of asset sales, operating cash flow, Allergan working capital settlement, and a full dividend cut to bring gross debt to the $30B level by the end of the year.” However, positive progress on any of these items may improve investor sentiment and could stabilize the stock temporarily.

In the long run, the analyst sees a much larger issue as the company battles a $5 billion debt, which even if cleared, would do little to solve “Teva’s leverage problem as Copaxone generics begin to enter the market in 2018 and erode its already weak EBITDA below $6B,” says Koffler.

“Longer-term, we expect a decline in the remaining business and don’t see anything in the branded pipeline to change this trajectory (vs. FactSet consensus expectations of a 2019 rebound). Teva may eventually lose its investment grade rating as a result and further share deterioration is a possibility longer-term,” the analyst concludes.

Tipranks analytics reveal Teva as a Hold. Out of 15 analysts polled by TipRanks (in the past 3 months), 2 are bearish, while 13 are sidelined on Teva Pharmaceutical stock. With a 65% upside potential, the stock’s consensus price target stands at $28.17.

 

 

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