Valeant Wins Huge Upgrades, Shares Rebound

(RTTNews) - Shares of Valeant Pharmaceuticals International Inc. (VRX, VRX.TO) gained more than 11 percent on Wednesday's trading after the Canadian drugmaker received two rating upgrades this week.

On Wednesday, Morgan Stanley upgraded Valeant Pharma to "overweight" from "equal weight" and increased its price target to $42 on its stock, noting that its upside skew is "attractive".

Morgan Stanley analyst David Risinger wrote in a note to clients that successful renegotiation of debt covenants, improved operating income and paying down debt by Valeant will drive significant equity value accretion.

The analyst said he believes that risks such as debt covenant violation, drug pricing resets, and skepticism about Valeant's financials are largely discounted in its shares.

Earlier this week, Mizuho Securities analyst Irina Koffler, who had been bearish on Valeant, upgraded the company, saying "our short thesis has been debunked."

In a research note, Koffler said she was upgrading Valeant to "neutral" with a price target of $25 per share. Earlier, Koffler rated the stock "underperform" with a price target of $11 per share.

However, Koffler said she continues to that view Valeant's full-year outlook as "unrealistic," due to the 2.2 percent sequential revenue decline in its top 30 products, 3.4 percent quarter-over-quarter decline in U.S. revenue, and significant pressure to cut its SG&A spend.

Last Tuesday, Valeant reported a net loss for the second quarter that widened from the year-ago period, while its total revenues decreased 11 percent. Nevertheless, the company reconfirmed its full year 2016 guidance.

Shares of the company are down 74 percent year to date through Tuesday.