Price-hike king Valeant could be hit hardest by FDA generics push: analyst

Valeant
The Valeant products on the FDA's new list of off-patent meds without generic challengers generated a combined $700 million-plus last year.

The FDA issued a hit list Tuesday of off-patent meds with no competition, hoping to spur generic challengers. While the move could take a toll on a number of drugmakers—including Pfizer and J&J—it may hit Valeant particularly hard.

A host of the Canadian drugmaker's products appeared on the 10-page list, Wells Fargo analyst David Maris pointed out in a Tuesday afternoon note to clientssome of them substantial contributors to Valeant's top line. Together, the 19 products flagged by the FDA generated more than $713 million in revenue last year. Considering Valeant’s sales struggles and debt woes, that’s a significant threat.

“Our review shows no company in our coverage universe is more exposed to this new FDA effort than Valeant,” Maris wrote.

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As Maris noted, the company has already tagged some of the Valeant drugs on the list, citing a risk of competition in the near term. But what’s new “is the FDA's focus on expediting competition on these products,” he wrote, adding, “We believe this is a risk factor for investors to be aware.”

The FDA unveiled the list Tuesday as part of a broader plan to lower drug costs, which have drawn plenty of negative attention over the last couple years. Valeant itself helped draw that unwelcome spotlight, particularly with mammoth price increases on Isuprel and Nitropress, two hospital-administered heart meds it purchased from Marathon Pharmaceuticals.

RELATED: Valeant's price-hike strategy goes far beyond two high-profile increases

The way the FDA sees it, the agency can prevent similar episodes by encouraging low-cost competitionbut competition is the last thing Valeant needs, what with its anchor gastrointestinal and dermatology franchises scrambling for sales. 

Valeant’s business trends “remain poor in our opinion,” Maris wrote in a separate note, adding that he and his fellow Wells Fargo analysts believe the “strong EPS growth” the Street forecasts for between 2018 and 2022 are “increasingly unlikely.”

RELATED: Hedge fund billionaire John Paulson steps into middle of Valeant mess as board member

Meanwhile, Valeant still has plenty of other issues to deal with, and that may be the reason hedge fund billionaire John Paulson took up a seat on the company’s board. His firm, Paulson & Co., currently ranks as Valeant’s largest shareholder, leading Maris, for one, to write that he “cannot help but think that Paulson joining the board is a signal of dissatisfaction of some sort.”