Stifel Sees A Long Road To Stabilization At Valeant

Valeant Pharmaceuticals Intl Inc VRX reported its 1Q16 results and reset its guidance once again. Stifel’s Annabel Samimy maintained a Buy rating for the company, while reducing the price target from $65 to $55. The analyst commented that although Valeant faces several challenges and recovery is likely to be slow, the company has “the assets and tools to stabilize its business and rebuild its reputation.”

Valeant reported its 1Q16 revenues at $2.37bn, marginally ahead of the consensus expectation of $2.35bn. EPS came in at $1.27, significantly missing the consensus estimate of $1.36.

Updated Guidance Conservative

Analyst Annabel Samimy said that Valeant’s 2016 guidance reflects “stabilization phase of recovery with no upside.” The company reduced its full-year revenue, adjusted EPS and EPS guidance from $11.0-$11.2bn to $9.9-$10.1bn, from $5.6-$5.8bn to $4.80-$4.95bn, and from $8.50-$9.50 to $6.60-$7.00, respectively.

Updated guidance reflected lowered revenue expectations for the Dermatology franchise and Xifaxan. Additional decreases are expected from rebates and volume-based discounts for Nitropress and Isuprel, Samimy noted.

“VRX has already initiated its plan to address the main concerns going forward which includes addressing negative ASPs and deploying a sales force to invigorate Xifaxan. We believe yesterday’s updated guidance is conservative and resolution of key issues surrounding the Dermatology franchise and Xifaxan are not reflected in the updated numbers and present upside,” the analyst wrote.