Mizuho Downgrades Valeant, Warns Of 'Ambiguous' Walgreens News

• Shares of Valeant Pharmaceuticals Intl Inc VRX have surged 61 percent since November 17, when they were trading around $73.
• Mizuho Securities’ Irina R. Koffler downgraded the rating on the company from Buy to Neutral, while raising the price target from $111 to $130.
• The role of the Walgreen partnership is not very clear, Koffler mentioned.

Valeant’s shares have risen in recent weeks, indicating a positive reaction to the company’s new prescription fulfillment program with Walgreens Boots Alliance Inc WBA and a reassuring 2016 guidance.

Although news of a legitimate distribution channel and a mildly lowered forecast cheered investors, the role of the partnership in improved filled prescriptions if payer restrictions persist is not clear, analyst Irina Koffler mentioned.

“Mgmt has not done a good job in articulating the details, in our view. We do think that Valeant can drive incremental growth by offering its older brands in lieu of generics but the positive impact of this plan may be slight,” the Mizuho Securities report noted.

Valeant has guided to 2016 revenues and adjusted EPS of $12.5-$12.7 billion and $13.25-$13.75, respectively, marginally higher than the Mizuho Securities estimates.

Koffler believes that Valeant’s R&D capabilities are not very impressive. He said, “While we continue to believe that its pipeline could deliver some singles and doubles, we saw nothing in there to support a strong terminal growth value for the company.”

Valeant’s legal and political issues could restrict further upside to the stock over the next couple of years.