Valeant Gets Vote Of Confidence From BofA; Firm Sees 80% Upside

• Shares of Valeant Pharmaceuticals Intl Inc VRX have declined more than 33 percent in the past  month, despite reaching a high of $262.52 on August 5.
• Sumant S. Kulkarni of Bank of America Merrill Lynch has reinitiated coverage of the company with a Buy rating and price target of $290.
• Although Kulkarni expects the volatility to continue, he believes that the risk-reward is favorable, with the potential for 80 percent upside to the stock valuation.

“Recent scrutiny on pharma/biotech pricing and on VRX’s specific pricing on some products has been the primary driver of a significant pullback, and could continue to be a source of volatility in our view,” the Bank of America report explained.

Analyst Sumant Kulkarni expressed confidence in the diversification in the company’s revenue base, as well as the pipeline, which is diversified across “relatively attractive markets such as dermatology, ophthalmology, gastroenterology, and consumer health that typically consist of longer-duration assets.”

In addition, Valeant Pharmaceuticals’ low product concentration reduces exposure of its brands to competition from generics and therefore “earnings cliffs.”

Kulkarni also mentioned that the organic growth outlook for 2H15 was encouraging at more than 10 percent.

“We believe that VRX is well-positioned to grow both organically through its promising pipeline and inorganically through its disciplined acquisition strategy in a consolidating pharma environment,” Kulkarni added.