Valeant Pharmaceuticals Intl Inc (VRX) Is Taking Reassuring Strides on Back of Strong International Segment

BTIG's Tim Chiang notes that with various positives soaring in Valeant's favor, these are mostly reflected in the stock's recently climbing levels.


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) continues to rumble in its comeback to investors’ good graces and gains, and one analyst is taking note from the sidelines, underscoring various “positives” in play for the biotech giant.

BTIG analyst Tim Chiang believes the company’s steps forward in the last six to nine months have been “encouraging,” and is out with an optimistic research note on the company’s uplifting road ahead for the new year.

Finding that the stock’s latest surge “reflects many of the positives,” the analyst reiterates a Neutral rating on VRX stock without listing a price target. (To watch Chiang’s track record, click here)

“We think it will become increasingly important for the Co. to continue to generate sales growth from the Bausch + Lomb / International segment, which has shown ~6% organic growth over the past 3 quarters. We expect there to be more visibility on the Co.’s global footprint given that ~72% of the B&L / Int’l segment sales are being derived from international markets, with ex-US sales making up ~40% of the Co.’s total revenues. For 2018, we think the key drivers for the equity will be management execution on the deleveraging of the balance sheet (we estimate the current debt / EBITDA ratio is ~7.4x), as well as how its key business units (B+L/Int’l, Branded Rx – Salix GI, Dermatology) grow in light of headwinds from loss of exclusivities, and continued pressure from payors,” Chiang contends.

Notably, the analyst highlights Valeant’s roughly 15% year-to-date rise as well as an approximate 35% jump in just the last six months.

For now, the analyst reiterates his expectations, calling for around $8.7 billion in revenue for 2017 with adjusted EBITDA of around $3.6 billion and revenue for 2018 to circle $8.6 billion with adjusted EBITDA of roughly $3.5 billion.

Praising the biotech giant’s Bausch + Lomb as Valeant’s most robust segment that benefits from its worldwide “presence” as well as new contact lens product offerings, Chiang looks for future growth here though 2018- especially thanks to standout international growth in China.

TipRanks indicates a largely doubtful analyst consensus not ready to take the gamble on this comeback ‘show me’ story of the Street. Out of 11 analysts polled in the last 3 months, 2 are bullish on Valeant stock, 5 remain sidelined, and 4 are bearish on the stock. Is the stock overvalued or undervalued based on these expectations? With a downside potential of nearly 22%, the stock’s consensus target price stands at $17.78.

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