Congratulations to Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shareholders. VRX stock is up an impressive 12% today, dishing out a much-needed glimmer of hope for a name that desperately needs to replenish its goodwill.
Of course, the obvious follow-up questions have already surfaced: What happened, and will it last?
Fortunately, the answers to the first question are relatively easy to find. As for the answer to the second question, that’s still anybody’s guess, as Valeant Pharmaceuticals remains a work in progress in most possible ways.
The Valeant News Is Good for a Change
Three items stand out as today’s prompt for the big jump from VRX stock … one more than the other.
The biggie is word from stock analysis outfit Rodman & Renshaw. Analyst Raghuram Selvaraju thinks VRX could sooner than later be worth $90 per share.
That wasn’t a misprint. Selvaraju sees enough catalysts on the near-term radar to (presuming all the catalysts are viewed favorably) drive VRX stock to a price that begins with the number nine and ends with the number zero — up more than 300% from its current price near $22.
“July is shaping up to be a busy month for Valeant, given the potential for three regulatory decisions in the coming weeks. On July 19, 2016, Valeant is slated to have its Biologics License Application (BLA) for brodalumab, an investigational anti-interleukin-17 (antiIL-17) monoclonal antibody for the treatment of moderate-to-severe plaque psoriasis, …. Also on July 19, Valeant is slated to receive an approval decision from the FDA on oral Relistor(r) (methylnaltrexone) for opioid-induced constipation (OIC). In our view, a positive decision could significantly expand the target market for Relistor and may enable it to become a blockbuster with over $1B in annual sales. Finally, we note that on July 21, 2016, Valeant and its partner NicOx S.A. (COX.PA, not rated) are slated to receive an approval decision on Vesneo(r) (latanoprostene bunod) for the treatment of glaucoma. … Given these near-term catalysts, we reiterate our Buy rating and $90 price target on Valeant shares.”
It is good stuff, to be sure. But, as Barron’s columnist Ben Levisohn queried (succinctly but firmly):
“$90 a share?”
Fanning the bearish flames on Wednesday were reports that Walgreens Boots Alliance Inc (NASDAQ:WBA) said it’s “satisfied” with its relationship with the drugmaker.
No, it doesn’t really mean a lot. It sounds good, though, alleviating worries that the pharmacy would seek to renegotiate its pricing for Valeant drugs. The mere fact that Walgreens Boots Alliance made a point of saying it didn’t plan on any changes is an assuring certainty that offers little of it right now.
Finally, Valeant announced today that the encouraging results of its Phase 3 trial of latanoprostene bunod (LBN) ophthalmic solution as a therapy for open angle glaucoma (OAG) or ocular hypertension (OHT) had been published in the American Journal of Ophthalmology. Not only will the publication lend credibility to the study, but it will spread the word about it to potential prescribers.
Between the three, it wasn’t surprising that VRX stock caught a brisk tailwind today.
Bottom Line for VRX Stock
While the news is all promising, none of it is game-changing, unfortunately. Valeant Pharmaceuticals still is buried in debt, and that’s taking a toll. Relatively new CEO Joseph Papa is making some bold moves, opening the door to asset sales to do so.
Selling assets, however, also culls the company’s capacity to drive some much-needed revenue, and it seems unlikely buyers of Valeant’s IP and business lines will be as generous as VRX was when it when on a buying spree in 2014 and 2015. Would-be buyers know Valeant is desperate.
More important right now, a price of $90 for VRX stock isn’t plausible — even if all three of Selvaraju’s catalysts pan out for the best.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.