Valeant Shares Surge as Credit Analyst Says Reaction ‘Overdone’

Shares of embattled drugmaker Valeant Pharmaceuticals International Inc. rose the most in almost nine months as a credit analyst said investors’ concerns over the company’s pricing practices and business model were “overdone.”

“We think it is important that investors not lose sight of the broader fundamental picture –- namely that these are asset-rich, high-cash-flow companies,” Citigroup Global Markets analyst Murali Ganti wrote in a note to clients on Thursday, referring to Valeant, Endo International Plc and Mallinckrodt Plc. Shares of the three drugmakers have fallen after scrutiny of their acquisitions and product pricing practices.

Valeant shares gained 15 percent to $83.30 at 3:15 p.m. New York time. That’s the biggest intraday gain since Feb. 23, though not enough to make up for the stock’s sharp since it’s all-time high on Aug. 5 of $262.52.

The company’s $3.25 billion of 5.875 percent notes maturing in May 2023 have dropped from an April high to 83.25 cents on the dollar at 2:48 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Valeant also responded to allegations that it was falsely recognizing inventory in warehouses as revenue in Eastern Europe.

“Allegations regarding heightened inventory levels at Valeant are unfounded,” the company said in a statement on its website. Valeant targets inventory levels for emerging markets at two to four months, higher than in developed countries, the company said. “All inventory in our warehouses is included on our balance sheet and is not recorded as sales until it is sold to a customer.”

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