Goldman Downgrades Valeant, Sees 'Long Road' For Controversial Stock

• Valeant Pharmaceuticals Intl Inc VRX have declined 47.79 percent over the past month, hitting a low of $90.51 on October 21.
• Goldman Sachs’ Gary Nachman has downgraded the rating on the company from Buy to Neutral, while lowering the price target from $180 to $122.
• Nachman prefers to move to the sidelines until there is greater visibility on the measures management would take to rectify the damage to Valeant's reputation and grow its business in a challenging environment.

According to the Goldman Sachs report, "Given the events that have transpired very rapidly in recent weeks that have raised many questions about certain aspects of VRX’s business model, we have less confidence the market will reward the stock anytime soon without clarity as to the path forward."

Related Link: Valeant Ditches Philidor: Here's What It Really Means

Analyst Gary Nachman continues to believe that the company’s longer-term fundamentals warrant a “much higher” stock valuation, although the near to medium-term risk-reward profile appears less clear.

"We expect a much longer road than we previously thought for the dust to settle and for VRX to be able to regain enough investor confidence to attract a sufficient amount of new money into the stock," Nachman mentioned.

Nachman also expressed surprise regarding the company's decision to part ways with Philidor was not well received, suggesting investor concerns that Valeant's problems could possibly spill over to other business segments.

"We're more concerned about potential business risk for VRX with physicians, patients and customers as a result of all the recent developments," Nachman explained.

The EPS estimates for 4Q15 and 2016-2019 have been lowered, largely to reflect the impact of severing ties with Philidor.