RBC Affirms Valeant (VRX) at 'Sector Perform'; Q2 Slightly Below Views, Walgreens Derm co-Pay Shows Improvement
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RBC affirms Valeant (NYSE: VRX) Sector Perform with a price target of $31 following Q2 results on Tuesday.
Analyst Douglas Miehm offered the following quick commentary ahead of the company's conference call:
Total revenues in Q2/16 were $2.42B vs. our forecast of $2.47B, and consensus of $2.47B (FactSet,15 analysts, $2.30-2.66B range). Relative to our forecasts, the Derm, GI, and Neuro/Other segments came in below our expectations, and the Emerging Markets businesses performed better than our expectations. We also note that VRX has sold all North American rights to Ruconest for up to $125MM (upfront $60MM) to Pharming .... Adj. EPS was $1.40 vs. our $1.44 estimate and consensus of $1.47 (FactSet, 18 analysts, $1.20-1.77 range). Management reiterated full-year 2016 guidance of $9.9-10.1B in revenues, Adj. EBITDA of $4.8-4.95B, and Adj. EPS of $6.60-7.00.
Walgreens (Nasdaq: WBA) derm co-pays increased as VRX continues to work through Walgreens ‘speed bumps’. Of note, the co-pays for commercially insured patients for Jublia, Onexton, and Solodyn increase from $0 to $25, and for all other brands that run through Walgreens, the co-pay increases from $35 to $40. The new Walgreens Access Program details include a Commercially Insured and Drug Not Covered patient category. Full details of the new co-pay program are outlined further in the note. We view the changes positively as the company will now receive cash co-payments from all patients, which we believe should resolve the negative ASP issue that plagued the derm portfolio in H1 2016. We also note that Valeant has rolled out the Walgreens access program to other independent pharmacies and based on our preliminary channel checks, it appears that Valeant has signed up a high number of independent pharmacies, with all searched zip codes leading to independent pharmacies outnumbering Walgreens locations by a significant number.
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