Valeant Expresses Confidence In Outlook, But Might Be Too Early To Get Bullish

The latest chapter in the Valeant Pharmaceuticals Intl Inc (NYSE: VRX) drama is a happy one. Shares of the battered pharma stock are up nearly 24 percent this week after the company reported Q1 earnings and raised its full-year earnings guidance.

Despite the good news and the positive move, BMO Capital analyst Gary Nachman believes it’s still too early to get bullish on Valeant. Valeant reported misses on both revenue and earnings in Q1.

According to Nachman, Valeant’s transition still has too many moving parts to allow investors to formulate a meaningful long-term outlook for the company.

“VRX is in a major transition with a lot of moving parts; [it’s] very challenging to get comfortable with underlying fundamentals and may take at least a couple of quarters of execution,” he explains.

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One of the key factors to a bullish outlook for Valeant is clarity from the company on how it plans to address its massive debt load. While core products maintain meaningful value, Valeant also needs to provide clarity on pricing and demonstrate a viable business model.

Nachman says Valeant could go a long way in reassuring investors if it can execute on its primary care ramp-up, and deliver successful approvals/launches of Siliq, Vyzulta and Luminesse. All of these products are expected to be approved and/or launched by the end of the year.

Valeant stumbled out of the gate in Q1 on key Branded Rx GI and Dentistry products, including Xifaxan, Uceris, Arestin and Apriso, all of which fell short of BMO’s expectations in the first quarter.

Despite the stock’s positive move this week, Valeant is off to another miserable start to the year. The stock remains down 13.9 percent year-to-date.

BMO maintains a Maret Perform rating on the stock.