JPMorgan Isn't Concerned About Valeant's Ad Hoc Committee At All; Says Sum-Of-The-Parts Shows Upside

Despite the plethora of bad press lately, it's not all bad news for Valeant Pharmaceuticals Intl Inc VRX.

On Tuesday morning, the biopharmaceutical company announced that its Ad Hoc Committee, which has been engaged in reviewing the Philidor matter in addition to other accounting concerns, has completed its review. The conclusion of the review came as a breath of fresh air, with no additional documents requiring further attention, according to the Ad Hoc Committee.

As the Committee's duties have come to a close, the group will disband and render oversight responsibilities to Valeant's 12 independent directors.

Related Link: Valeant Creditors Reportedly "Balking" At Revised Lending Agreement; Investors Concerned

Analysts' Take

Following this announcement, JPMorgan analysts led by Chris Schott noted that the Ad Hoc Committee's findings de-risk the stock. In addition, Schott sees additional catalysts that could further de-risk the story. "We see focus returning to both fundamentals (quarterly results/cash flows) and SOTP valuation, where we see Valeant's current asset base representing meaningful upside vs. today's share price," the analyst elaborated.

"Additionally, we would not rule out asset sales over time as the company looks to accelerate its de-levering, which we believe would be well received by investors."

Schott summarized, "We are encouraged by this update, and continue to see filing the 10-K (reaffirmed on or before April 29) as a key catalyst for VRX shares. Moving forward, we will look for improvements in quarterly results and cash flows (starting in 2Q/16), and remain OW shares as we believe SOTP value is well above Valeant's current share price."

JPMorgan currently rates Valeant at Overweight; the stock was recently seen up more than 8 percent on the day, trading at $28.21.