This company took a headline beating for raising prices way too much. It is also a gigantic holding in Bill Ackman’s Pershing Square hedge fund. Valeant Pharmaceuticals International Inc. (NYSE: VRX) develops, manufactures and markets pharmaceuticals, over-the-counter products and medical devices worldwide. Its extensive list of products treat everything from severe acne to Wellbutrin XL for major depressive disorder in adults; Jublia for onychomycosis of the toenails; Xenazine for chorea; Targretin for cutaneous T-cell lymphoma; Arestin, a subgingival sustained-release antibiotic; and Provenge for the treatment of prostate cancer.
Valeant shares are down a huge 37% in the past two months. The downtrend was particularly dramatic in September after a comment from presidential candidate Hillary Clinton on the rising prices of specialty drugs led to a massive sell-off in biotechs. The company responded this week by reporting solid third-quarter results, with revenues up a stunning 44% and earnings per share 36%.
Ackman recently revealed Pershing Square’s big position in Valeant and said “If I had to pick one stock in our portfolio that is the most undervalued, it is Valeant.” While there always has been an eye raised at the company’s acquisition strategies from some corners of Wall Street, the upside potential is strong and Stifel agrees.
The Stifel price target is a gigantic $285, and the consensus target is $273. The stock closed Tuesday at $146.74, down almost 11% — and shares just got slaughtered after Citron Research published a short seller note with a $50 price target asking if Valeant could be the Pharma version of Enron.
We actively covered this stock a couple of years ago, as Zogenix Inc. (NASDAQ: ZGNX) had a top long-lasting pain-killer approved. The pharmaceutical company develops therapies for the treatment of central nervous system disorders. It has moved on in a big way since selling the approved drug Zohydro, doing a big reverse split on the stock and recently supplying additional information as requested by the U.S. Food and Drug Administration (FDA) for its Phase 3 program of ZX008, low-dose fenfluramine for Dravet Syndrome, infant epilepsy.
Stifel is cautiously optimistic on the outcome for the ZX008 trials. It expects a three-to-six month follow-up echocardiogram after the last administration of ZX008 and views the information procured as additional safety data. The primary endpoint in the clinicals is the percentage change in convulsive seizures from baseline. Stifel also noted that the company has indicated it will be conducting what is called proof-of-concept studies in other pediatric epilepsy indications.
The Stifel target price is $28, and the consensus target is $24.80. The shares closed Tuesday at $12.22, down over 10%.
These stocks are not for the faint of heart, and only suitable for extremely aggressive accounts. That said, the bottom line is they all have huge upside targets at Stifel, and if they only got halfway there, they would still be home runs.