Mizuho’s Irina Koffler Sounds the Alarm on Valeant Pharmaceuticals Intl Inc (VRX) Despite $820 Million Dendreon Sale

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares are rising 6% after the firm announced its first large divestiture of 2017: the sale of its Dendreon cancer business in an $820 million deal to Chinese conglomerate Sanpower.

However, top analyst Irina Rivkind Koffler at Mizuho remains bearish despite the positive reaction from investors today, noting, “Dendreon represents a low multiple sale,” a sale that hit “meaningfully below” her $1,981 billion projection. Therefore, the analyst reiterates an Underperform rating on VRX with a price target of $11, which represents a close to 33% downside from where the shares last closed.

Koffler believes, “To be fair to Valeant, the company acquired Dendreon for $495M in 2015, so is selling the business for a ~66% premium (pretty good, in our view). Additionally Valeant noted in prior discussions that some assets would likely fetch sales multiples below 11x EBITA (so deal valuation should not be surprising). The company plans to use proceeds from the deal to repay a portion of its term loans. At the same time, the WSJ noted that Valeant is also exploring a sale of its Indonesia and Vietnam businesses, but valuation of these assets remains unclear. We also expect Valeant to divest its dental business as well as its interests in select geographies.”

“If we pull this asset out of our model and use the cash proceeds to repay debt we think the impact is dilutive to our current $11 PT,” Koffler concludes, looking ahead to the troubled biotech giant’s comments on the transaction at a key investor conference later today.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Irina Rivkind Koffler has achieved a high ranking of #68 out of 4,347 analysts. Koffler upholds a 53% success rate and garners 20.2% in her yearly returns. When recommending VRX, Koffler earns 22.1% in average profits on the stock.

TipRanks analytics exhibit VRX as a Hold. Based on 12 analysts polled by TipRanks in the last 3 months, 1 rates a Buy on VRX stock, 8 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $21.10, marking a 30% upside from where the stock is currently trading.

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