Valeant Shares Surge, But BTIG Remains Cautious On Recovery

Valeant Pharmaceuticals Intl Inc VRX shares surged 25 percent on Tuesday, following the company’s Q2 earnings report. BTIG’s Timothy Chiang maintained a Neutral rating on the company.

Cautious Stance

“While the tone of management seems to have taken a more positive turn, we are still cautious on the stock and believe the Co.’s recovery is still largely a work-in-progress,” Chiang mentioned.

Chiang believes new CEO Joe Papa has been working his way through the issues that plague the company, which could prove beneficial for the stock.

On the other hand, given the weaker than anticipated Q2 results and the meaningful year-on-year declines in the dermatology and eye care Rx businesses, the analyst believes it would be overly optimistic to expect a rapid recovery in 2H16, especially in the absence of a material buy-in from patients for Valeant’s products.

Guidance Reaffirmed

Management reaffirmed its revenue and EPS guidance for 2016, reflecting a stronger 2H16, with the company targeting growth in the dermatology business, as well as acceleration in sales for the Salix segment, launch of Oral Relistor and a rebound in the emerging markets segment.

“While we admit Valeant has had a history of reporting stronger 2H results, we don’t think the Co. will have the same level of pricing flexibility this year as it has had in past years. We think this means that Valeant will need to rely more on volume growth to achieve its goals,” Chiang stated.

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