Valeant (VRX) Gets a Price Target Hike on Back of Xifaxan Growth Potental

Shares of Valeant (NYSE:VRX) sold off recently after the FDA gave a no-go to the company’s plaque psoriasis treatment Duobrii. The FDA’s issuance of a complete response letter for Duobrii indefinitely delays any timeline for Duobrii contributing to Valeant’s plan to spark sales growth in that segment.

However, Mizuho analyst Irina Rivkind Koffler says she is less focused about the dermatology business, and believes the gastroenterology business is an underappreciated growth driver for Valeant.

Koffler opined, “We spoke with Valeant mgmt, Dr. Mark Pimentel (a prominent Xifaxan KOL), as well as a third party familiar with rifaximin drug development. Based on these discussions we conclude that (1) There are multiple commercial tactics that the company plans to employ to drive near-term Xifaxan growth; (2) longer-term, Valeant has identified a Xifaxan life-cycle extension strategy, as well as additional label expansion opportunities that are supported by prior studies; and (3) there are interesting, low-risk pipeline programs that the company can annex to create further growth visibility.”

“Because there is a polymorph patent protecting Xifaxan until 2024, we think that generic competitors would need to initiate an IBS-D trial (comparing both drug and generic arms to placebo), which could delay ANDA submission for years. Valeant has already started working on its soluble rifaximin formulation as a life-cycle extension strategy, and will also initiate late stage trials in SIBO and liver conditions with this dosage form. These will dovetail with the ongoing study in Crohn’s that is being conducted in a different colonic release formulation of rifaximin, that is expected to read out in 2020,” the analyst added.

Net net, Koffler reiterates a Buy rating on Valeant shares, while raising the price target from $27 to $31, which represents a potential upside of 34% from where the stock is currently trading. (To watch Koffler’s track record, click here)

Wall Street is not convinced just yet on this biotech player. Based on 14 analysts polled by TipRanks in the last 3 months, 5 rate a Buy on Valeant stock while 5 maintain a Hold. and 3 recommend a Sell. The 12-month average price target stands at $22.20, marking a slight downside potential from current levels. 

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