Deutsche Bank Resumes Valeant Pharmaceuticals (VRX) at Hold
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Deutsche Bank resumed coverage on Valeant Pharmaceuticals (NYSE: VRX) with a Hold rating and a price target of $30. Analyst Gregg Gilbert sees a rebound in dermatology revenue in the second half of the year.
"We are re-instating coverage of VRX with a Hold rating and $30 price target based on our new, preliminary model. We say preliminary when referencing our model because VRX will be reporting on a new segment structure starting with 3Q results in late Oct / early Nov, and other major changes may occur, including but not limited to changes in debt structure, material divestments of products and geographies, and a new outlook from a recently-hired CFO that we believe will want to instill a strong 'meet or beat' culture when it comes to guidance," said Gilbert.
The analyst continued, "We believe that our new model has a conservative slant overall, as it does not include new product flow from the pipeline and assumes a relatively negative assumption for the duration of the company’s largest product, Xifaxan. On the other hand, we do not factor in any fines for ongoing investigations and lawsuits, and we assume that revenue for the dermatology business begins to rebound in 2H16 and into ’17."
Gilbert added, "For VRX’s largest product Xifaxan, we model sales of $844mn in 2016 (24% growth) and $953mn in 2017 (13% growth), which reflects continued solid but decelerating volume growth. For the dermatology segment, we model a significant increase in sales in 2H16 (vs. 1H16) to reflect an improvement in sales per Rx related to VRX’s enhancements to the Walgreens access program (implemented in early August)."
Shares of Valeant Pharmaceuticals closed at $27.10 yesterday.
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