Louise Chen Roots for Valeant Pharmaceuticals Intl Inc (VRX) in the New Year on Back of Ocular Redness Asset’s FDA Nod

Cantor's Louise Chen believes Valeant will surpass $8 billion in sales in 2018, and says the set-up for the rebounding giant "keeps getting better" following Lumify's approval.


While most of Wall Street is not ready to take the gamble on Valeant Pharmaceuticals Intl Inc (NYSE:VRX), one bull clings onto his upbeat perspective on this comeback kid of the Street. Especially following last Friday’s news that VRX’s Bausch + Lomb segment just got the green light for Lumify, the only over-the-counter eye drop with low-dose brimonidine designed to treat eye redness, 2018 is starting to glimmer with potential for the once beleaguered biotech giant.

Cantor analyst Louise Chen says it is now “up and away” for Valeant, noting that “the outlook for 2018 keeps getting better” between approvals for Lumify, psoriasis asset Siliq, and glaucoma asset Vyzulta under Valeant’s belt.

To Chen, this indicates “healthy organic growth,” growth in fact that “may be underappreciated by the market.”

Betting on an undervalued biotech player, the analyst notes this is precisely why he recently lifted his 12-month target expectations, as he reiterates an Overweight rating on VRX stock with a $25 price target, which implies a 15% upside from where the shares last closed. (To watch Chen’s track record, click here)

Chen notes, “The set up for VRX is becoming more clear in 2018+ with: 1) new product approvals/launches; 2) the continued growth of B+L and Salix; and 3) faster than expected debt paydown.”

“We do think consensus estimates for sales and EBITDA are too high for 2018, but this is already anticipated to come down, in our view,” adds the analyst, who angles for $8.1 billion in sales and $3.1 billion in EBITDA come 2018, under the Street’s forecasts of $8.5 billion in sales and $3.4 billion in EBITDA.

The analyst concludes offering some context on Valeant’s now-approved Lumify, and why its very design offers a compelling profile in soothing eye redness without suffering severe side effects: “According to VRX, Lumify will be available for purchase in major retailers in 2Q18. Ocular redness is a common condition that can be caused by inflammation of almost any part of the eye. With frequent use, non-selective redness relieving eye drops that constrict blood vessels in the eye can result in users developing a tolerance or loss of effectiveness, as well as rebound redness. In contrast, low-dose brimonidine, the active ingredient in Lumify, selectively constricts veins in the eye, increasing the availability of oxygen to surrounding tissue, thereby reducing the potential risk of these side effects.”

Moving forward, Valeant is looking at a prospective FDA nod for its other psoriasis asset IDP-118, set for a PDUFA date June 18th of the new year.

TipRanks shows mixed sentiment on the Street leaning towards the bears when it comes to Valeant’s market opportunity in the biotech-verse. Based on 11 analysts polled in the last 3 months, Chen is the only analyst bullish on Valeant stock, against a majority of 6 analysts surveying from the sidelines, and 4 bears left running for the hills. Is the stock ultimately an overvalued or undervalued player in light of these analyst expectations? With a loss potential of 27%, the stock’s consensus target price stands at $15.78.

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