Two Healthcare Analysts Share Mixed Views on Valeant Pharmaceuticals Intl Inc (VRX) and Gilead Sciences, Inc. (GILD)

Analysts weigh in on two biotech giants as one, Valeant Pharmaceuticals Intl Inc (NYSE:VRX), tries to dig itself out of a hole of debt and corporate embarrassment while Gilead Sciences, Inc. (NASDAQ:GILD) acquires resources to continue dominating liver disease treatments.

Valeant Pharmaceuticals Intl Inc

As Valeant continues to battle debt and fraud allegations, top analyst Irina Rivkind Koffler of Mizuho voices her disappointment in the company this morning. The analyst comments on the beginning of staff layoffs and Valeant’s inability to move forward with negotiations to loosen financial covenants. Ultimately, the analyst believes there are “no quick fixes for Valeant’s situation while additional risks and unknowns persist.”

According to an internal memo, outgoing CEO Michael Pearson announced that Valeant will be downsizing, laying off nearly 400 employees on various sales teams. Koffler notes, “These terminations are likely to rattle an already fearful and paralyzed organization.” These terminations include sales representatives for Addyi, the recently approved sexual stimulant for women; Xifaxan, an FDA-approved product for IBS; and general sales reps for Valeant’s GI, dermatology, and women’s health products.

Koffler views this downsizing as “an expected first step in the shrinking of the business.” This downsizing will save about $60 million in addition to one-time severance payments. The company is likely to “actively explore additional divestitures” and other cost-saving efficiencies to cut costs. Once Valeant has completed its cost-cutting efforts, Koffler believes there won’t be “much left to do” since most of the company’s assets are “unattractive to potential buyers.”

To add insult to injury, Koffler explains that Valeant’s negotiations with loan holders have “hit a wall,” making the company unable to “waive the technical default and loosen financial covenants.” While Koffler continues to survey this situation, she remains unimpressed with the company at large during this time. As a result, Koffler reiterates an Underperform rating on Valant with an $18 price target, marking a 30% downside from where shares last closed.

According to TipRanks, Koffler is a top-ranked analyst with a 57% success rate recommending stocks and a +28.9% average return per rating. Four analysts, including Koffler, are bearish on Valeant; 7 are bullish; and 11 remain neutral. The average 12-month price target between these 22 analysts is $54.88, marking a $110 potential upside.Koffler stat

Gilead Sciences, Inc.

Following Gilead’s announcement that it will be acquiring technology to treat NASH, a serious liver disease, UBS analyst Matthew Roden weighs in on the biotech giant and this new step to augment its portfolio.

Gilead will be acquiring Nimbus Apollo’s lead NASH technology for an upfront payment of $400 million and a potential additional $800 million over time. NASH affects up to 15 million people in the US and Gilead expects the disease to be the leading cause of liver transplants by 2020.

Roden explains that this new technology complements Gilead nicely, allowing it to be used “in sequential or combination therapy to Gilead’s assets.” He elaborates, “We further see NASH as an important category for Gilead given its clinical and commercial expertise in liver diseases (not to mention the potential size of the category and chronic disease), and hence we wouldn’t be surprised if they continue to add assets to their portfolio in NASH.”

While Roden currently views the acquisition as a “modest positive,” he notes the possibility that it can become a “significant positive” in the future if Gilead is able to meaningfully incorporate this new technology. As a result of the acquisition, Roden reiterates a Buy rating on Gilead with a $130 price target, marking a 37% upside from where shares last closed.

According to TipRanks, Roden has a 58% success rate recommending stocks with a 13.6% average return per rating. Thirteen others are also bullish on Gilead while 4 remain on the sidelines. The average 12-month price target between these 18 analysts is $114.50, marking a 21% upside from where shares last closed.

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