Analyst believes a buyer would be interested in Valeant’s gastroenterology portfolio rather than entire asset portfolio
Last week, reports surfaced that Valeant Pharmaceuticals Intl. Inc. (NYSE:VRX) has rejected the joint takeover bid by TPG and Takeda Pharmaceuticals. Following that development, comments from the Street continue to pour in. After Mizuho Securities updated its thesis on the stock last week, Piper Jaffray analyst David Amsellem has reiterated his Underweight rating on the stock.
Mr. Amsellem views the chatter of Valeant’s rejection as illogical because of its prevalent tough market position. After the Canadian pharmaceutical company received the joint takeover offer by the two bidders, shares closed up 5.49% at $28.42 Friday.
The offer was made prior to the appointment of new CEO Joseph Papa, who is reportedly mapping out Valeant’s course of action. Based on this, Valeant Pharmaceutical declined to discuss takeover offers.
The analyst does not see Valeant’s complete asset portfolio worthy enough to be acquired by a financial or strategic buyer as he says its market value is lesser than the company’s total debt pile of $31 billion. Nevertheless, he believes Valeant’s gastroenterology segment should be appealing for a buyer. He said: “Though we do believe that there would be significant strategic interest in VRX’s gastroenterology (GI) assets (i.e., Xifaxan, Relistor, Apriso and Uceris), we find it difficult to fathom why a strategic or financial buyer would have interest in the entire asset portfolio.”
Mr. Amsellem anticipates a strategic activity for the $10.25 billion company to strike in the form of either an asset sale or a split off. Valeant has made massive changes at the helm of its business but analysts are still skeptical about its growth and view a tough road ahead. The specialty pharmaceutical company is facing sharp scrutiny since August 2015, resulting from a series of negative news adding to which are its dubious business operations.
The Street’s mean 12-month price target stands at $60.61 on Valeant Pharma’s stock. The estimate indicates a meaningful upside potential of 113.3% over the last close of $28.42.