Valeant Pharmaceuticals (VRX) Subpoena 'Far from Certain', UBS Says; Sees Bounce Back in Stock

UBS analyst Marc Goodman reiterated a Buy rating and $285 price target on Valeant Pharmaceuticals (NYSE: VRX) following yesterday's sell-off amid news Democratic members of the House Committee on Oversight and Govt Reform sent a letter requesting Chairman Jason Chaffetz (Republican) to subpoena Valeant to turn over documents related to price increases for these products.

Goodman notes that, importantly, management expects 3Q guidance of double-digit organic growth and addressed 2 concerns around the Valeant business model. First off, management reiterated that its business is focused on private and cash pay markets and that only ~15% of rev is exposed to US government reimbursements. Second, its business is largely driven by volume growth with modest price increases. Only a small and declining portion of its biz (10%) has historically
taken price increases.

The analyst sees a subpoena far from certain. "This is a subpoena request by the minority party and, according to our Washington DC consultant, based on his analysis of responses to prior events, it is far from certain that Chairman Chaffetz would agree," Goodman commented. "The Democrats have asked on pricing issues before, and the Chairman has declined."

On the stock, the analyst believes the sell-off was due to concerns about the potential subpoena. "Given that VRX has significantly underperformed and the granting of a subpoena is far from certain, we would expect VRX to bounce back," he concluded.

For an analyst ratings summary and ratings history on Valeant Pharmaceuticals click here. For more ratings news on Valeant Pharmaceuticals click here.

Shares of Valeant Pharmaceuticals closed at $166.50 yesterday.

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