Valeant Pharmaceuticals (VRX): More Financial Elbowroom?

H.C.


Valeant Pharmaceuticals (NYSE:VRX) is on its way to gaining greater financial breathing room, especially following last week’s step- locking down revolving and credit facilities for a full refinancing. Could this challenged biotech giant be making a comeback to long-term sustainable gains once more?

H.C. Wainwright analyst Ram Selvaraju is pleased to see some more financial rope on VRX’s side, but he still needs to see further proof of its picture down the line.

As such, the analyst reiterates a Neutral rating on VRX stock with a $20 price target, which implies a 14% downside from current levels. (To watch Selvaraju’s track record, click here)

This marks the company’s fourth amended and restated credit coupled with guaranty deal which makes a full refinancing possible of VRX’s secured revolving and term loan credit facilities. Additionally, the company settled its prior revealed offering of 8.500% Senior Notes due in 9 years by its wholly owned indirect subsidiary Valeant Pharmaceuticals International (VPI).

To put it simply, Selvaraju explains, “From our perspective, these developments simply underscore the fact that Valeant is gradually obtaining more financial flexibility, as the shorter-term debt tranches have been considerably reduced.”

Additionally, the biotech giant’s gastroenterology portfolio is on spotlight at the Digestive Disease Week meeting in Washington, D.C. this week. Valeant’s wholly-owned subsidiary Salix Pharmaceuticals as well as the gastrointestinal tract disorders-focused division of the company had expressed in the past of plans to post a fresh batch of scientific data. This includes investigative data on the safety and efficacy of Xifaxan and Plenvu.

“From our perspective, the clinical data being showcased on XIFAXAN were particularly important, underscoring the drug’s profile in diarrhea-predominant irritable bowel syndrome (IBS-D). We consider the IBS-D indication the most critical for the long-term commercial future of XIFAXAN. While the FDA has set a PDUFA date of November 16, 2018 for its decision on the New Drug Application (NDA) for Aemcolo (Rifamycin SV MMX®) for the treatment of patients with travelers’ diarrhea (TD), we do not view Aemcolo as a direct threat to XIFAXAN in IBS-D for the time being,” concludes Selvaraju.

TipRanks indicates caution dominates the Street on this beleaguered biotech giant. Out of 13 analysts polled in the last 3 months, 4 are bullish on VRX stock, 5 remain sidelined, while 4 are bearish on the stock. With a loss potential of nearly 15%, the stock’s consensus target price stands at $19.82.

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