Market Overview

Bank Of America Is Buying Valeant's Philidor Selloff

Bank Of America Is Buying Valeant's Philidor Selloff
  • Shares of Valeant Pharmaceuticals Intl Inc (NYSE: VRX) have declined 56.31 percent over the last three months, hitting a low of $109.54 on October 27.
  • Sumant S. Kulkarni of Bank of America Merrill Lynch has maintained a Buy rating on the company, with a price target of $173.
  • Kulkarni believes that the market reaction to the news that CVS Health Corp (NYSE: CVS)'s Caremark and Express Scripts Holding Company (NASDAQ: ESRX) would no longer work with Philidor.

Analyst Sumant Kulkarni stated that the pullback in the stock after hours on October 29 was overdone, given that Philidor, “the controversial specialty pharmacy network that VRX has an option to acquire,” contributes only 6.8 percent of Valeant Pharma’s revenues.

Related Link: Mizuho Upgrades Valeant To Buy, Says Its 'Volkswagen Event' Has Played Out

“We believe these events could hasten VRX’s potential move away from utilizing Philidor’s services,” an option that the company has mentioned earlier, Kulkarni mentioned.

Kulkarni believes that a move away from Philidor would be well received by investors, while expressing continued confidence that Valeant Pharma’s diverse business mix, low product concentration risk and durable asset base position the company to generate robust cash flow.

According to the Bank of America report, Valeant Pharma has various options to consider, such as the option to acquire Philidor, which is unlikely to be well received by investors. The other option is to sever ties with Philidor and look for alternative third-party specialty pharmacies.

Kulkarni also believes that “another option could be for VRX to move to traditional distribution channels for products that it currently sells through specialty pharmacies.”

Latest Ratings for VRX

Jun 2018DowngradesBuyHold
Jun 2018UpgradesEqual-WeightOverweight
May 2018UpgradesNeutralBuy

View More Analyst Ratings for VRX
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Philidor Sumant S. KulkarniAnalyst Color Health Care Reiteration Analyst Ratings General Best of Benzinga


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