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In Order To Make A Turnaround, Valeant Will Need To Go Back To Basics

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In Order To Make A Turnaround, Valeant Will Need To Go Back To Basics

Barclays’ Douglas Tsao believes the Q3 results reported by Valeant Pharmaceuticals Intl Inc (NYSE: VRX) proved there are no easy fixes for the challenges being faced by the company, despite the increased transparency.

Tsao maintained an Equal Weight rating on the company, with a price target of $34.

Guidance Cut

“The cut to '16 guidance wasn't a surprise, but management indicating 4Q would be lower Q/Q and '17 lower than '16, left investors wondering how the company can get numbers moving up again,” the analyst mentioned.

Bloomberg reported that the 2016 profit guidance cut took investors “off guard,” especially since the guidance was now well below expectations.

Back To Basics

“On fundamentals, CEO Joe Papa noted he is bringing back "basics" of sales and marketing, skills he learned in the mid-80s, as a means to reset promotion efforts,” the analyst stated.

In addition, its CFO emphasized that near-term costs were necessary to drive long-term returns, while also highlighting that the weakness in neurology and generics had led to the guidance revision for 2016.

“VRX expects core assets to grow at mid-single digits on top-line and high single digits on EBITDA line; however, the growth is not enough to offset declines in neurology and generics,” according to the Barclays report.

There also have been concerns regarding the uncertainty about the future growth prospects for Valeant, especially given the pressures being faced by managed care and the business controversies.

Latest Ratings for VRX

DateFirmActionFromTo
Jun 2018DowngradesBuyHold
Jun 2018UpgradesEqual-WeightOverweight
May 2018UpgradesNeutralBuy

View More Analyst Ratings for VRX
View the Latest Analyst Ratings

Posted-In: Barclays Douglas TsaoAnalyst Color Reiteration Analyst Ratings Best of Benzinga

 

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