MONTREAL -- Valeant Pharmaceuticals shares rebounded Wednesday, partially recovering severe losses after being accused of drug price gouging.
The Quebec-based company's shares closed up more than 12 per cent to $238.30 in trading on the Toronto Stock Exchange and to US$178.66 in New York.
The move helped Valeant (TSX:VRX) regain its position as Canada's third-largest company after the Royal and TD banks with more than $81 billion in market capitalization. At its peak, Valeant only trailed Canada's largest bank when its value approached $119 billion.
The recovery came after analysts suggested that Monday's selloff that saw shares fall 16.5 per cent was a buying opportunity for investors.
Neil Maruoka of Canaccord Genuity has a target price of US$300, saying the company has "ample opportunity for organic growth going forward."
The analyst said the impact of potential pricing control needs to be put in perspective since the company expects to generate 30 per cent of its revenues from outside the U.S. and much of its American business is insulated against pricing pressure.
Douglas Miehm of RBC Capital Markets forecasts that Valeant would lose about $310 million in annual revenues if prices were to revert to 2014 levels, equating into an $8-10 impact on its share value.
However, he questioned if 18 Democratic members of the House committee on oversight and government reform will succeed in forcing Valeant to testify next week and turn over documents.
A spokesman for the Republican-controlled committee said no decision has been made on a subpoena.
The Democrats say Valeant is using the same business model as hedge fund manager Martin Shkreli, whose company increased the price of a medication called Daraprim to $750 from $13.50 after buying the company that owned the rights.
The price of Valeant's congestive heart failure treatment Nitropress and another heart drug, Isuprel, increased by 212 and 525 per cent respectively on the day it purchased the rights to these drugs from Marathon Pharmaceuticals. The drugs are Valeant's seventh and 11th largest brands.
