The shares of Valeant Pharmaceuticals (VRX) are falling after Wells Fargo initiated coverage of the stock with an Underperform rating, the firm's equivalent of a "Sell." Valeant's strategy is risky and there are many unanswered questions remaining about the company, the firm stated.

UNANSWERED QUESTIONS: Valeant has made decisions that may pose significant risks to the company's business and reputation, according to Wells Fargo analyst David Maris. The company has embraced a business model that incorporates practices, such as cutting the costs of acquired companies and raising drug prices, that are under "intense scrutiny", the analyst believes. As a result, Valeant's growth could be stunted, he warned. Additionally, even after meeting with Valeant's management, Maris says he has many unanswered questions about Valeant in a variety of areas, including its "investment considerations, strategic direction, recent guidance, and the mechanics of [its] Walgreen's (WBA) - Get Report deal." Valeant has not explained how the unwinding of Philidor, which represented 6.8% of revenue, results in a 36.6% reduction in earnings, said Maris, who recommended that investors avoid the stock. He set a $65-$68 price target range on the shares.

FOCUS OUTPERFORM CALLS: Maris is much more upbeat about the outlook for two other pharma names, Teva (TEVA) - Get Report and Amphastar (AMPH) - Get Report . The analyst resumed coverage of Teva with an Outperform rating, saying that its pipeline includes two potential blockbusters - SD-809 and TEV-48125 -which are underappreciated, while its generic portfolio is "best in class." Moreover, its profits should come in above expectations going forward, believes Maris, who set a $68-$71 price target range on the shares. The analyst initiated coverage of Amphastar with an Outperform rating, saying that the company has the potential to become "one of the fastest-growing generic drug and specialty pharmaceutical companies within the next 3-5 years driven by the strength of its pipeline." He set a $20-$22 price target range on the shares.

WHAT'S NOTABLE: Maris also resumed coverage of Jazz Pharmaceuticals (JAZZ) - Get Report with an Outperform rating and Mylan (MYL) - Get Report with a Market Perform rating. He additionally initiated coverage of Allergan (AGN) - Get Report , Perrigo (PRGO) - Get Report , Mallinckrodt (MNK) - Get Report , Emergent BioSolutions (EBS) - Get Report and Neos Therapeutics (NEOS) - Get Report , all with Outperform ratings.

PRICE ACTION: In morning trading, Valeant sunk 6.2% to $88.30, while Teva lost 0.5% to $56.77 and Amphastar was flat near $11.20 per share.

Exclusive Look Inside:
You see Jim Cramer on TV. Now, see where he invests his money and why Allergan and Wallgreens are core holdings of his multi-million dollar portfolio.
Want to be alerted before Jim Cramer buys or sells AGN or WBA? Learn more now.

The Fly

is a leading digital publisher of real-time financial news. Our financial market experts understand that news impacting stock prices can originate from anywhere, at any time. The Fly team scours all sources of company news, from mainstream to cutting-edge, then filters out the noise to deliver short-form stories consisting of only market moving content. Follow @theflynews on Twitter. For a free trial, click