Valeant (VRX) Investigation Headlines Hurt Reputation, Financially and Sentiment - Wells Fargo's Maris
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Wells Fargo's David Maris weighed in on Valeant Pharmaceuticals (NYSE: VRX) following reports after the close Wednesday that under criminal investigation related to its past non-disclosed relationship with Philidor.
Maris notes that since the launched coverage on the stock, they've stated that investigations by state attorney generals, the IRS, the SEC and others are a significant risk factor, as is the ongoing insider trading suit.
"The risks not only include reputational harm, but include potential financial damages and fines, and also potential commercial sanctions or restrictions," he notes. "Additionally, these investigations can also have an impact on the shares from a sentiment standpoint, as some investors may choose not to own shares where there is news flow and allegations of fraud or other impropriety as these funds often hear from their investors about their holdings."
Maris said while it is not possible to know how the investigation will turn out or if charges will be pursued, they believe that with Valeant having such high debt, the impact of financial or commercial penalties is high.
The firm maintained an Underperform rating and $17-$22 valuation range on VRX.
Shares of Valeant Pharmaceuticals closed at $27.32 yesterday.
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