Valeant Pharmaceuticals International Inc. shares plunged Tuesday on their worst day ever, falling as much as 51 percent after the company cut its 2016 forecast, reported a weak fourth quarter, and said it risked breaching some of its debt agreements if it can’t file its annual report in time.
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Schott wrote in a note to clients Wednesday that he was “surprised and disappointed” in the magnitude by which Valeant slashed its outlook for earnings and sales.
The results did not meet Wall Street expectations.
“In addition, management transition issues and continued organizational distractions are expected to negatively impact operations during the quarter”, Valeant said. Investment firm Ruane, Cunniff & Goldfarb, its largest holder, lost $1.6 billion and T. Rowe Price lost $1 billion, according to a Reuters review of investor regulatory filings.
“Our business is not operating on all cylinders, but we are committed to getting it back on track”, Pearson said.
For years, Valeant was an investor darling, buying up assets and delivering double-digit profit growth.
Up until a few months ago, Valeant had been aggressive in increasing the price of drugs, particularly ones acquired from buying out other companies. Last fall, the drug maker was accused of using a specialty pharmacy to manipulate insurance reimbursements on its highly profitable dermatology drugs. Valeant on Tuesday called the fourth-quarter results preliminary and said it would file final results “as promptly as reasonably practicable”. It however, for the first time said raised the possibility of a default as a result. 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. On an adjusted basis, the company reported a net profit of $2.50 per share, down from $2.58 per share in the prior year period and lower than the $2.62 per share Street estimate provided by Capital IQ.
Valeant’s revenue for the fourth quarter was just under US$2.8 billion – in line with analyst estimates – but the company reduced its previous sales and adjusted earnings estimates for the first quarter of 2016.
The company said it expects revenue in the range of $2.3 billion to $2.4 billion for the fiscal first quarter. Valeant has said that Philidor’s pharmacy network includes R&O. Post opening the session at $69.55, the shares hit an intraday low of $66.68 and an intraday high of $70.43 and the price fluctuated in this range throughout the day.
The overall 87% drop since the stock reached a high of $262.52 in early August means Valeant now has a market value of roughly $11.4 billion, well below the Canada-based company’s $30.3 billion debt load.
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The company is also facing an investigation from the U.S. Securities and Exchange Commission and scrutiny from Congress over its drug pricing.
