Mizuho Isn't Convinced In Valeant's Turnaround, Cuts Price Target To $11

Valeant Pharmaceuticals Intl Inc VRX crashed more than $5 per share on Tuesday. The stock didn't get much relief on Wednesday.

After trading down more than 2 percent most of the day, Mizuho came out with a mid-day note on the struggling pharmaceutical company. The firm cuts its price target from $18 to $11, reiterating an Underperform rating.

"Valeant lowered 2016 guidance for the second time this year. We now fall at the low end, and remain concerned about execution, weak margins, and tough comps next quarter. We don't rule out another cut to guidance."

Related Link: Valeant's Debt In 2020 'May Be Too High A Hurdle'

Mizuho continues to expect annual declines to Valeant's long-term business.

"Our 2016 EBITDA estimate is $4.6B (EBIT+$200M in depreciation), which is an uncomfortable range for bondholders," the note read. "Next quarter we expect tough Y/Y comps as the Salix acquisition is annualized, which may further expose weakness in Valeant's eroding base business."

Mizuho continued, "We think that correcting declining ASP in Walgreens and accelerating the Xifaxan growth trajectory are uncertain initiatives that require at least a year to demonstrate impact and we therefore think numbers could remain relatively weak for the rest of 2016. We already view the Xifaxan HE initiative as purely aspirational, since Salix previously failed to expand this market and targeted $1B in sales."

The firm also expects Valeant to revisit divesting one or more of its core franchises.

Shares traded recently at $24.10, down 2.2 percent on the day.