Wells Fargo's Analyst Discusses Valeant's 'Apology Tour'

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David Maris is an analyst at Wells Fargo that initiated coverage of Valeant Pharmaceuticals Intl Inc VRX 3.62% with a Sell rating back in February. On Wednesday, he was a guest on CNBC's Halftime Report segment to discuss his views on the company.

Maris began by saying that appointing Joe Pappa to replace Mike Pearson as Valeant's new CEO might "sound great," but the company's business is "weak" and its pricing strategy is failing. The analyst pointed that the company raised the price of 16 different drugs in January – a troubling move at a time when the entire industry faces the scrutiny of politicians and the company itself was called to testify at a Senate hearing on Wednesday.

"What are you doing?" Maris hypothetically asked of Valeant's management team. "What are your actions? Are you rolling back prices?"

"No, you aren't rolling back prices," the analyst continued. "Are you giving that back to the consumer that paid too much or the insurance company that paid too much? They aren't doing any of that."

Maris acknowledged that drug companies should be able to raise the price of their drugs, but there is a fine line between a 5 percent price hike and a 500 percent price hike, which "just isn't acceptable."

When asked if Valeant's stock is a compelling price at its deflated level, the analyst pointed out that by 2020 the company will owe $12 billion to creditors – a level that may be too high to pay without selling off assets.

"I just don't see a good clear path forward to recommend a stock that owes so much money and whose business model has just deteriorated in six months," Maris concluded.

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