What You Should Know About The Drug Approval Valeant Could Receive This Week

Amid “overstated” legal issues and in the aftermath of natural disaster, Valeant Pharmaceuticals Intl Inc VRX may profit from a positive catalyst this week, according to H.C. Wainwright & Co.

Analyst Raghuram Selvaraju reiterated a Neutral rating on the stock with a $17 price target Monday.

What Could Go Right?

Prior to this week, things hadn’t looked promising for Valeant’s Vyzulta. But new developments may merit optimism for the drug’s approval.

The U.S. Food and Drug Administration had previously issued a Complete Response Letter rejecting the drug’s marketing application, as well as a Voluntary Action Indicated classification related to weather concerns for its Tampa manufacturing plant.

However, the facility’s evasion of Hurricane Irma improves Valeant’s prospects of executing its timeline.

“We believe that Valeant should now be in position to overturn the FDA's CRL and receive approval for Vyzulta, while other drugs — e.g., another Valeant ophthalmology agent, the ocular redness treatment Luminesse — slated to be produced at the Tampa facility should no longer face the prospect of regulatory approval delays,” Selvaraju wrote in a Monday note.

At the same time, Selvaraju considers Valeant favorably situated in its legal battle with Lord Abbett & Co.

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Lord Abbett sued the New Jersey firm last month for violation of the state Racketeer-Influenced and Corrupt Organizations law, which resulted in an alleged $80 billion in investor losses. While Lord Abbett could seek damages three times its sustained losses, any such payout is dependent on evidence of Valeant’s violation of RICO, according to H.C. Wainwright.

“Without such evidence, we do not believe Lord Abbett would be able to obtain a substantial settlement against Valeant simply to compensate for securities losses, as such a judgment would undoubtedly engender the issue of moral hazard,” Selvaraju wrote. “For the moment, therefore, we believe the risk posed by this lawsuit may be overblown.”

What The Street Thinks

H.C. Wainwright’s reiterated rating leaves Valeant with 10 Holds, three Sells and three Buys, according to TipRanks. The top two analysts covering the stock offer conflicting assessments, with a $7 price target against an $18 price target. Stifel Nicolaus considers Valeant worth $45 a share.

At the time of publication, the stock was trading at $13.92.

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