Deutsche Bank: Valeant Stock Could Be Worth $18, $30 Or $36

Shares of Valeant Pharmaceuticals Intl Inc VRX have plummeted 73 percent year-to-date, due to pending restatements, 10-K filing delay, and ongoing Board investigation into Philidor and accounting-related items.

Deutsche Bank’s Gregg Gilbert wrote about what a theoretical model for a “new VRX” could be like under the guidance of new management. The analyst mentioned key insights as:

1. The company would be able to service its debt only if there is flat to modest revenue growth. However, this would not be possible if revenues decline.
2. If Valeant were to be sold in pieces, “it would have to recoup its entire investment in deals since 2008 to support the current stock price,” Gilbert mentioned.
3. A sum-of-the-parts analysis based on acquisition multiples implies marginal upside from the current share price.

Possible Upside? 

Valeant is estimated to have spent more than $41bn on deals since 2008. A theoretical scenario in which the company recovered this investment yields an equity value of $30 per share, the analyst mentioned. In case the company sold its assets for 10 percent less than the amount spent on deals, this scenario yields an equity value of $18 per share.

“A sum-of-the-parts analysis based on multiples that VRX paid for various assets (a potentially overly generous approach) yields an equity value of $36/share,” Gilbert commented. He added, “We are not suggesting that asset sales will occur or are the way to go.”

Analyst Gregg Gilbert does not have a rating for the company, and has not assigned a price target as of now.