Healthcare analysts weigh in on two healthcare giants Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). While one analyst sees Valeant taking a large impairment on Sprout, the other shines light on Teva’s recent clinical updates. Let’s take a closer look:
Valeant Pharmaceuticals Intl Inc
Wells Fargo analyst David Maris provides insight on shares of Valeant, the troubled biotech giant that amid selling off its assets and wavering in the face of a volley of legal woes. The analyst now predicts Valeant to endure a considerable impairment charge on its Sprout acquisition.
Sprout’s claim to fame is its female libido pill Addyi, which Valeant bought for $1 billion back in August of 2015, long before Sprout investors would join the long list of those frustrated with the giant, unhappy that VRX set too lofty of a price for the drug. Flashback to December of 2015, sales were projected to hit $100 to $150 million this year.
However, as per IMS data, July sales merely reached $696,235. In fact, from Maris’ viewpoint, “We believe that Addyi has no chance of reaching $100 million in 2016 and might not even reach $10 million.” As Maris sees it, both Sprout and its leading pipeline drug Addyi might total collectively at or less than $50 million in valuation. Present-day, Maris anticipates 90% of Addyi’s value might need to be written off as an impairment charge, which leaves the analyst bearish on VRX.
As such, the analyst reiterates an Underperform rating on VRX with a valuation range of $17 to $22, which represents a nearly 39% downside to just under a 21% downside from where the shares last closed.
Maris notes, “We believe there may be other assets that face this same problem, compounding Valeant’s divestiture plans, as Valeant would lose not only the cash flow from the products, but the addback to adjusted EPS of potentially overstated intangible asset amortization.” Furthermore, Maris is surprised VRX has not already needed to take substantial impairments.
“Valeant warned in its recent 10-Q of potential impairments to Sprout/Addyi, and based on this, as well as the clearly poor sales trajectory, and the changed marketing effort, we believe the impairment is overdue. We suspect that Valeant could rectify this with next quarter’s results, if not sooner,” the analyst concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst David Maris is ranked #1,646 out of 4,183 analysts. Maris has a 48% success rate and earns 2.0% in his yearly returns. When recommending VRX, Maris realizes 3.9% in average profits on the stock.
TipRanks analytics exhibit VRX as a Hold. Based on 16 analysts polled in the last 3 months, 5 rate a Buy on VRX, 9 maintain a Hold, while 2 issue a Sell. The consensus price target stands at $38.61, marking a 39% upside from where the stock is currently trading.
Teva Pharmaceutical Industries Ltd (ADR)
Mizuho top analyst Irina Rivkind Koffler share her two cents on Teva after the company recently announced results from its 52-week Ph II dose-ranging study of pridopidine, a drug candidate intended to treat Huntington’s disease movement symptoms.
Koffler noted, “The team views this as an exciting commercial opportunity since it would encourage undiagnosed HD patients to get tested and start chronic treatment early to slow disease progression. However, if the drug only benefits early stage patients, we would expect a gradual launch curve as new patients are identified.”
In addition, Teva announced positive top-line data from its second pivotal trial of SD-809 (deutetrabenazine) in tardive dyskinesia (a disease with high unmet need).
“Patients hit the primary endpoint (AIMS score) for the 36 mg and 24 mg dose of the drug, and demonstrated a significant improvement on the Clinical Global Impression of Change (CGI) (though only patients on the 24 mg dose hit the more rigorous protocol-specified CGI secondary endpoint of “much improved” or “very much improved” and the 36 mg dose almost reached statistical significance). The tolerability profile was in line with previous SD-809 clinical trials,” Koffler noted.
Koffler rates TEVA a Buy, with a price target of $64, which implies an upside of 25% from current levels.
According to TipRanks, 5-star analyst Irina Rivkind Koffler has a yearly average return of 21.9% and a 56% success rate. Koffler has a -6.8% average return when recommending TEVA, and is ranked #37 out of 4183 analysts.
Out of the 25 analysts polled by TipRanks, 18 rate Teva stock a Buy, while 7 rate the stock a Hold. With a return potential of 36%, the stock’s consensus target price stands at $69.37.