The company risks defaulting on its debt if the 2015 annual report is not filed by April 29.
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Valeant was once a high-performing stock and a favorite among hedge funds, but has lost over three-quarters of its market value over the last four months.
“In addition, management transition issues and continued organizational distractions are expected to negatively impact operations during the quarter”, Valeant said. The company scrapped earnings guidance and till now has not filed its annual report for 2015.
Uncertainty about the potential for a default creates “enormous investor fear”, said Bill Ackman of Pershing Square Capital Management, one of Valeant’s largest shareholders who also sits on its board of directors.
Valeant’s quarterly report comes after the Canadian drugmaker postponed its financial results on February 28 and withdrew its guidance as it said Chief Executive Michael Pearson had returned from medical leave. During the same quarter in the previous year, the company posted $2.58 EPS. If those debtors chose to declare the company in default on its debt, which totals about $30 billion, Valeant could be forced to make repayments faster and see limits on future borrowing. In a much-delayed business update Tuesday morning, the troubled drugmaker slashed its sales forecast for the year by $1.5 billion and signaled weaker Q1 outlooks for its dermatology and gastrointestinal businesses.
“The challenges of the past few months are not yet behind us”, Pearson said in the statement.
Valeant’s Q4 earnings per share (EPS) came in at US$2.50, which was US$0.11 below consensus estimates. At the same time, the company said that it would pay down at least US$1.7 billion in 2016, less than the at least US$2.25 billion goal it gave in December. It also explores options to divest non-core assets to enhance its liquidity position. Valeant Pharmaceuticals intends to repay at least $1.7 billion of debt this year.
Valeant grew into one of the world’s most valuable pharmaceutical companies through acquisitions. It has lost about three-quarters of its value since peaking last summer amid questions about its business practices and disclosures of government investigations. Analyst David Maris mentioned that the Street may cut its expectations for FY16 and later periods, and concluded that investors should avoid the stock; he reiterated an Underperform rating on VRX shares. In an investors’ briefing, the company said it cut its 2016 revenues and earnings forecast more than expected. The company is now including a line-item in its earnings particularly related to costs of winding down that arrangement. Valeant has denied the allegations and launched an internal review into its relationship with Philidor.
Valeant said it is cooperating with these investigations and is providing documents and testimony authorities have requested.
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No matter how Valeant Pharmaceuticals International Inc. tries to win investors favor but its situation gets worse.
