Canaccord Sees More Bumps In The Road Ahead For Valeant

Valeant Pharmaceuticals Intl Inc VRX is scheduled to report its 1Q financial results on June 7. Canaccord Genuity’s Neil Maruoka maintained a Hold rating for the company, with a price target of $40. The analyst commented that the company continues to face challenges and its full-year gross margin may be impacted by price headwinds and potentially higher rebates to managed care.

Analyst Neil Maruoka expects Valeant to report its 1Q revenue at $2.4 billion, representing a sequential decline of 15.1 percent. He added, “Going into the print, we expect that many of the issues that have dogged the company in 2015 are likely to spill over into the first quarter.”

Challenges Continue

The company could witness substantial risks in 2016, mainly on account of drug pricing, “especially following the ferocious grilling the company received at the hands of the US Senate Special Committee on Aging.” Maruoka also expressed concern regarding Valeant’s strained relationships with managed care, and a likely reduction in full-year guidance.

Control Environment

The analyst identified deficiencies in Valeant’s internal controls as a key risk. While the company has mentioned initial steps to remedy these deficiencies, these have not been implemented completely. “Moreover, given the heightened scrutiny of Valeant’s business practices, we believe that politicians, regulators, and payors now feel they have the ‘political license’ to push back on the company.”