BTIG Sees Valeant's (VRX) Growth Plan Taking Longer than Expected to Implement; Affirms at 'Neutral' (WBA)
BTIG affirmed Valeant Pharma (NYSE: VRX) with a Neutral rating following Q1 results and cut outlook issued on Tuesday.
Analyst Timothy Chiang offered the following commentary late Tuesday: Valeant shares took another pounding today following the release of 1Q results that did not provide investors much reassurance. While new CEO Joe Papa provided a plan to help fix the Co.’s dermatology segment, and accelerated growth at Salix, we think this plan could take more than just 3-6 months to implement. We think the rebuilding of access for its dermatology products via Walgreens (Nasdaq: WBA) could take longer as regaining the trust of its customer base will take time. Management highlighted that it is experiencing pressure on average selling prices on the products that are being dispensed through Walgreens, which suggests to us that there is a significant amount of resistance in the marketplace towards its dermatology products.
In sum, we don’t expect a quick recovery to occur at Valeant, and while we can appreciate the greater level of transparency that is being provided by management, we think it will remain a challenge for the Co. to generate profits in excess of its newly lowered targets. For CY16, we have lowered our EPS estimate to $6.61 (from $8.92).
On the firm's Neutral rating, Chiang said, While Valeant trades at a ~60% discount to its peers, we believe there still remains quite a bit of uncertainty with how payors will react in 2016. In addition, we believe heightened oversight could impact future cash flows.
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