RBC Cuts Valeant Valuation In Half, Downgrades Because Of SEC Probe

RBC Capital Markets' Douglas Miehm downgraded the rating for Valeant Pharmaceuticals Intl Inc VRX from Outperform to Sector Perform, while reducing the price target from $194 to $85. Valeant announced that it is facing several ongoing investigations, including those by the US Attorney's Offices for Massachusetts and the Southern District of New York, Congress and a previously undisclosed SEC investigation. Without providing any detail of the SEC probe, the company confirmed that it had received a subpoena from the SEC in Q415 and intended to include it in its 2015 10-K disclosures. Analyst Douglas Miehm believes that although the probe issue may not be that significant, investors may seek some clarity before expanding the valuation multiple. Valeant continues to run a high quality business, while limited visibility into various issues hinders its future outlook. Although the company's operations are expected to improve given its recently announced unique Walgreens access program, lack of visibility on various issues make multiple expansion difficult, Miehm commented. The analyst expects Valeant's stock to trade at a discount to its peers unless the various outstanding issues are resolved. "These items include the delayed 10-K filing and Q4/15 results, the withdrawal of guidance, the ongoing investigations, the Ad Hoc Committee's report, and the company's potentially strained relationships with constituents in the U.S. healthcare system (managed care organizations and PBMs)," the RBC Capital Markets added.