Valeant Pharmaceuticals (VRX) Draws a Price Target Lift from Deutsche Bank; Here’s Why

Deutsche Bank's Gregg Gilbert now angles for 22% in return potential for VRX shares following good litigation news for largest drug Xifaxan.


Valeant Pharmaceuticals (NYSE:VRX) just gained more time on exclusivity to the tune of an extra year for Xifaxan, designed to treat diarrhea predominant Irritable Bowel Syndrome. The Xifaxan patent case against Israeli pharma giant Teva had recently been stayed in litigation, extended from April 30th through July 30th– and could see further extensions ahead.

This is no small win, considering this asset is a key growth driver, bringing a roughly 13% slice of the biotech giant’s revenue to its table. Deutsche Bank analyst Gregg Gilbert is even more bullish on back of the news for the company’s biggest product.

In reaction, the analyst reiterates a Buy rating on VRX stock while bumping up the price target from $20 to $22, which implies a close to 22% upside from current levels. (To watch Gilbert’s track record, click here)

“Recall that the companies agreed to stay the patent case last year after FDA revised its draft bioequivalence guidance for Xifaxan generics in order for TEVA to evaluate the implications of the revised guidance. According to the court docket, the companies agreed to extend the stay ‘because the facts and circumstances that warranted a stay as of May 15, 2017 have not materially changed.’ We previously modeled Xifaxan exclusivity through 2024, which represented a middle case scenario with generic competition ahead of patent expiry (the patents extend to 2030). Given that TEVA does not yet appear to have clarity on the path forward for its generic filing, we are now factoring in an additional year of exclusivity […] In our view, this could represent a decent ‘settlement’ scenario if TEVA is able to resolve the issues with its filing. We look forward to an update from TEVA when the company reports 1Q18 results on 5/3,” writes Gilbert.

Bottom line, “We continue to like the risk/reward for the stock,” concludes the bull on back of this promising legal development for Xifaxan.

TipRanks suggests Wall Street is not ready to bet on this beleaguered biotech giant quite yet. Out of 10 analysts polled in the last 3 months, 3 are bullish on VRX stock, 5 remain sidelined, while 2 are bearish on the stock. With a loss potential of 3%, the stock’s consensus target price target stands at $17.69.

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