Shares of Valeant Pharmaceuticals (VRX) are on the rise after Deutsche Bank analyst Gregg Gilbert upgraded the stock to Buy, saying the company has undergone "significant change" over the last two years under the new management team, and he likes "the set-up from here."

BUY VALEANT: In a research note to investors this morning, Deutsche Bank's Gilbert upgraded Valeant Pharmaceuticals to Buy from Hold, with an unchanged price target of $20. The analyst pointed out that the drugmaker has undergone "significant change" over the last two years under the new management team, which he applauds for managing near-term debt maturities, returning the core franchises to growth, and resolving some legacy legal issues. While Gilbert acknowledged that challenges remain, most notably the heavy debt load, he believes Valeant is doing "the right things" to strengthen the business, including investing behind core growth franchises, reducing legal liabilities, and strengthening the balance sheet. He particularly likes that management is now confident enough in the business to have established longer-term revenue and EBITDA targets. Nonetheless, the stock should remain highly volatile, with trading often seemingly disconnected with fundamentals, he added.

XIFAXAN GROWTH IMPROVING: Gilbert also highlighted that Xifaxan is Valeant's largest product and an important growth driver. The company's efforts to better access the primary care market appear to be doing well, with volume growth accelerating, the analyst contended, adding that management remains confident in the protectability of the franchise given its IP, technical hurdles for generics, and lifecycle management initiatives. The analyst models a generic cliff in 2025, which may be potentially conservative.

PRICE TARGET: In morning trading, shares of Valeant have gained about 4.3% to $15.52.