With Valeant's Continued Deterioration, Rodman & Renshaw Downgrades To Neutral

Valeant Pharmaceuticals Intl Inc (NYSE: VRX) reported its Q3 revenue and earnings short of expectations. The company’s sales could decline in 2017, partly due to competition from generic products, Rodman & Renshaw’s Raghuram Selvaraju said in a report. He downgraded the rating on the company from Buy to Neutral, while slashing the price target from $81 to $23.

Valeant reported its Q3 adjusted cash EPS at $1.55, versus Rodman & Renshaw’s estimate of $1.71. Revenue came in at $2.48 billion, missing the estimate of $2.53 billion.

Downtrend To Continue

Management indicated a possible sequential decline in Q4, which has traditionally been a seasonally strong quarter for the company. What is “more disturbing” is that management expects the decline to continue in 2017, analyst Selvaraju mentioned.

Valeant is expected to face generic competition for Ofloxacin Otic, Ziana and Zegerid. Moreover, the expected genericization of Nitropress and Isuprel in 2017 could add to the pressure on the company’s revenue in the near- and midterm, Selvaraju stated.

The company reduced its 2016 guidance from $9.9 billion–$10.1 billion to $9.55 billion–$9.65 billion.

“Since we cannot forecast when the company might return to growth, and given the continuing litany of risks that Valeant faces, including ongoing legal challenges, subpoenas, regulatory warning letters, and possible criminal investigations of its former executives, we believe that the prudent move would be to step to the sidelines at this juncture,” the analyst wrote.

The adjusted cash EPS estimate for 2016 has been was reduced from $6.60–$7.00 to $5.30–$5.50.

At last check, Valeant was up 3.17 percent at $16.60.