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Valeant target cut to $7-9 by Wells Fargo

April 21, 2017

Wells Fargo analsyt David Maris reiterated an Undeperform rating and lowered his valuation range on Valeant Pharmaceuticals (NYSE: VRX) to $7 – $9 from $10 – $13 although he believes may beat consensus revenue and EBITDA in 2017.

Maris does not the “beats” will be due to strength in its core business or better-than-expected prescription trends, but because Valeant’s guidance for losses of exclusivities (LOEs) may be too pessimistic.

The analyst does not believe owning the shares are worth the risk. While debt maturities in the next three years are only approximately $1.5 billion, in 2020 and beyond the maturities increase rapidly with $5.8 billion due in 2020 and a total of $22.2 billion due 2020-2023, he notes.

He does not cash flow will be sufficient to meet the debt due from 2020-2023, and its asset sale options are probably fewer than many believe.

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