Wells Fargo reiterated its Underperform rating on Valeant Pharmaceuticals Intl Inc NYSEVRX, saying the new
Bloomberg reported that U.S. authorities are investigating potential accounting fraud charges related to the company's secretive ties to Philidor, a specialty pharmacy company that Valeant actually controlled.
The report, however, does not cite whether the case would target only the former CEO Mike Pearson and CFO Howard Schiller, or the company as well.
Nevertheless, Wells Fargo said the newly reported fraudulent account charges would make refinancing “significantly more expensive or possibly unavailable,” apart from potential sizable financial penalties. In addition, the company would find difficult to retain and attract talent.
In recent times,
“We strongly suggest investors consider the risks of potential sizable financial penalties and costly legal actions on a company with more than $30 billion of debt that has already sought debt waivers twice,” analyst David Maris wrote in a note.
Maris pointed out that Valeant has not reserved neither against any class action suits, nor any cases that may arise from the IRS, DoJ and SEC investigations. However, Maris included $2 billion of legal liabilities in his model.
As such, the analyst is refraining himself from recommending Valeant as an investment, given too many risks associated with the shares.
“Our concerns stem from a number of factors, including opaqueness related to accounting issues, what we see as balance sheet risks, unanswered questions related to business practices, and confusion over how the Walgreens deal actually benefits Valeant,” Maris elaborated.
Maris has a valuation range of $17 to $22 on the stock, which is currently up 3.7 percent at $18.50.
|Sep 2016||Deutsche Bank||Initiates Coverage on||Hold|
|Aug 2016||Morgan Stanley||Upgrades||Equal-Weight||Overweight|
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