Top25-SA-Banner

Valeant Pharmaceuticals Intl Inc (VRX): Organic Growth Comeback Not There Yet

H.C. Wainwright's Ram Selvaraju is glad to see VRX pushing out maturities on its massive debt- but still sees a "rock" rolling down the path.


As Valeant Pharmaceuticals Intl Inc (NYSE:VRX) continues along the path of debt refinancing and reaching towards the execution of a branded franchise, H.C. Wainwright analyst Ram Selvaraju is out with a research note on the beleaguered biotech giant.

On the heels of Valeant revealing a tender offer for $1.5 billion of its senior notes due in the next two and three years, Selvaraju comments, “Management continues to roll the rock down the road.”

That said, the analyst chooses to keep playing it safe here, reiterating a Neutral rating on VRX stock with a $16 price target, which implies a 5% downside from current levels. (To watch Selvaraju’s track record, click here)

For context, 6.375% and 5.375% notes are due in 2020 and 6.75% notes are due in 2021. In the past, VRX had up-sized a former $1.25 billion offering up to $1.5 billion of 9.25% senior notes due in 2026.

Overall, “By our calculations, the retirement of $1.5B worth of the earlier-maturing notes would reduce Valeant’s debt maturing in 2020 and 2021 to around $4B, which we consider quite manageable. The company may seek to address the remaining maturities through accelerated paying down of debt from free cash flow and additional isolated divestitures. While we are moderately encouraged by Valeant’s continued ability to push out the maturities on its debt, we remain focused on the health of its underlying businesses and note that the company overall has yet to return to organic growth,” Selvaraju contends.

TipRanks signals caution as the word on the Street hovering over VRX shares. Wall Street is largely split between the bulls, the sidelined, and the bears: out of 12 analysts polled in the last 3 months, 4 rate a Buy on VRX stock, 5 maintain a Hold, while 3 issue a Sell on the stock. Yet, could optimism be baked into these analysts’ expectations on the beleaguered biotech giant? Consider that the 12-month average price target of $18.83 reflects 11% in return potential for the stock.