Wells Fargo On Valeant: Things Can Always Get Worse

Wells Fargo reiterated its Underperform rating on Valeant Pharmaceuticals Intl Inc (NYSE: VRX) saying "things can always get worse" with the stock.

"Just when we think everything is bad, they find a way to surprise us to the negative," analyst David Maris said on CNBC.

Maris, who cut the valuation range of shares to $17-$22, said the company may not be able to cover 2020 debt, saying it will be too high a hurdle as the company is not generating enough cash.

Further, the analyst noted the company has nothing special in drug pipeline and its deal with Walgreens Boots Alliance Inc (NASDAQ: WBA) is not making money.

Related Link: Mizuho Isn't Convinced In Valeant's Turnaround, Cuts Price Target To $11

Maris said if the company doesn't have cash to pay debt, they might opt for reorganization or sale of assets. The analyst noted if the company sells assets, earnings will come down and it may affect valuations – a negative for equity holders.

It's a case of "slippery slope," he added.

The analyst said even if the company decides to exercise asset sales to the tune of $100 million to $400 million, the market may become excited. But, it will be nowhere near the $32 billion debt.

Meanwhile, Maris said he don't think CEO Joe Papa can take the company out of troubled waters.

"This isn't a one person job, it is a culture that has been negative for a while. The products not selling and the deal with Walgreens is a lot worse than anyone expect," Maris highlighted.

On the M&A front, the analyst noted, "I don't see anyone stepping in to buy the company as no one wants to take the headache of prices, IRS and SEC probe. It doesn't make sense from the cash flow point of view."

At time of writing, shares of Valeant fell 2.47 percent to $24.06. They were off 91 percent from their 52-week high of $263.81.