Valeant Pharmaceuticals Intl Inc (VRX) Spurs Sidelined Analyst to Boost Price Target

H.C.


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is eliminating risk clouds that were once hovering ominously above left and right.

First, in the last few months alone, the biotech giant has made meaningful headway in advancing its pipeline. Second, the beleaguered giant’s debt load has seen major relief, with key steps underway in repayment efforts. Third, the ghost of legal drama past from Allergan shareholders alleging Bill Ackman’s Pershing Square and Valeant had unfairly taken advantage from a botched effort to purchase Allergan four years ago is nearing resolution. This week, a California judge indicated he would approve the insider trading settlement reached.

H.C. Wainwright analyst Ram Selvaraju is taking notice, praising “late-stage agents nearing [the] finish line,” the continuation of debt reduction, as well as a settlement amount that seems “manageable,” yet another risk factor knocked off the list.

In reaction, the analyst reiterates a Neutral rating on VRX stock bumps up the price target from $17 to $24, which implies a 4% upside from current levels. (To watch Selvaraju’s track record, click here)

As far as Selvaraju sees the pipeline picture, Valeant’s ophthalmology as well as dermatology pipelines seem to be glimmering the most with reassuring indications of maturation. Glaucoma drug Vyzula is in mid-launch process following last year’s regulatory win as ocular redness asset Lumify is readying for a launch next quarter. Meanwhile, Valeant’s psoriasis asset Duobrii has an FDA PDUFA date with destiny come June 18th with psoriasis topical lotion Jemdel having just submitted a New Drug Application (NDA) last month. Additionally, Valeant’s NDA for Altreno, acne treatment in lotion form, and the first tretinoin product in lotion form instead of a gel has a PDUFA date assigned for August 27th.

Regarding debt shackles being lifted, Selvaraju pays attention to the fact that debt has seen a reduction beyond $6.5 billion, which “significantly” trounces “CEO Joe Papa’s original promise to pay down principal by at least $5B by February 2018.”

“In our view, the company could reduce outstanding debt principal to the long-term target of roughly $20B without having to resort to any further significant divestitures or sales of core divisions,” underscores the analyst, who commends “the rapidly improving debt picture and a positive outlook for the company’s late-stage pipeline.”

Regarding the settlement reached between Allergan shareholders and Pershing Square and Valeant, the analyst contends, “We note that the judge’s sanctioning of the settlement appears to remove another risk factor for Valeant, since the total liability in the insider trading suit had previously been estimated at $2B or more.”

Selvaraju is not ready to get bullish just yet, but he is certainly optimistic on Valeant’s opportunity, contemplating an upgrade in the future: “If Valeant management indicates that the company is slated to return to organic top-line growth in 2018, we believe this would be sufficient for us to reconsider our rating on the company. However, at this stage we feel the risk/reward remains balanced and accordingly maintain a Neutral stance.”

Looking ahead, the analyst awaits Valeant’s formal fourth quarter print likely to be released February 27th along with financial 2017 results and an institution of a formal guide for the new year.

TipRanks shows a Street-wide opinion that this comeback biotech giant of the Street has not yet gained its way back into the good graces of investors, still on the road to recovery. Based on 11 analysts polled in the last 3 months, just 2 are bullish on Valeant stock, 5 remain sidelined, while 4 are bearish on the stock. With a loss potential of nearly 22%, the stock’s consensus target price stands at $17.78.

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