Valeant, Endo Both Buys in Specialty Pharma


Deutsche Bank’s Gregg Gilbert takes a look at the specialty-pharmaceutical sector on Friday, writing that Valeant Pharmaceuticals International (VRX) and Endo International (ENDP) both look poised for more gains.


Gilbert reiterated a Buy rating on Valeant and raised his price target by $2 to $25, based on more upbeat estimates for irritable-bowel drug Xifaxan, currently its biggest seller at around1 13% of sales.

He’s pushed out his generic cliff for the drug by another year, to 2027, to give Valeant more credit for protecting the franchise. He also argues that there could be more upside for the drug if it grows faster than anticipated, and if it’s able to fight off generic competition beyond 2027 due to new innovations and applications.

As for Endo, Gilbert reiterated a Buy rating as well, although he did lower his price target by $2 to $10. He admits that the shares are down some 20% so far this year, and that it’s difficult to tell what will turn investor sentiment more positive on the shares. That said, he’s encouraged that some overhangs for the stock could begin to dissipate, including stabilizing generic pressures and that its diabetes drug Vasostrict is unlikely to face competition in the near future.

Valeant is up 0.5% to $22.10 this morning, while Endo is up 1.6% to $6.39.

The SPDR S&P Pharmaceuticals ETF (XPH) is up 1.1% to $42.55 and the Health Care Select Sector SPDR ETF (XLV) is  1% higher to $83.15.

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