Valeant's Stock Soars After Morgan Stanley Analyst Turns Bullish

Shares of Valeant Pharmaceuticals International Inc. shot up 9.7% in active premarket trade Wednesday, after Morgan Stanley analyst David Risinger turned bullish on the drug maker, citing the belief that major risks to the company have already been priced into the stock. Risinger raised his rating to overweight, after being at in line since October 2015. He raised his stock price target to $42, which is 58% above Tuesday's closing price of $26.60, from $27. "Risk of severe financial stress should diminish as [debt] covenants are renegotiated and [Valeant] pays down debt, and deleveraging should drive equity value accretion," Risinger wrote in a note to clients. Regarding risks of drug pricing resets, Risinger said Valeant has already experienced step downs in net pricing and access, and he his valuation estimates already account for generic competition for the company's most controversial drugs--Isuprel and Nitropress--over the next six to 12 months. The stock, which was on course to open at a 2 1/2-month high, had plunged 74% year to date through Tuesday, while the SPDR Health Care ETF had tacked on 3.1% and the S&P 500 had gained 6.6%.