Valeant’s financial rollercoaster took another sharp turn yesterday after the company cut its revenue forecasts for 2016 and reported a fourth-quarter loss.
The company’s shares fell more than 50% as investors voted with their feet, spooked by the company’s statement that it will not meet previous earnings targets and is at risk of failing to meet deadlines for filing its report for full-year 2015.
The deadline for an unaudited report on the year is 16 March, while Valeant is required to have an audited version submitted by 29 April, a deadline which chief executive Michael Pearson would not commit to meeting while speaking with investors yesterday.
A default could mean the company faces claims for early repayment of debt, although one of Valeant’s main investors – Pershing Square’s Bill Ackmann – has suggested that creditor banks will likely provide a waiver to prevent a default.
Valeant’s long-term debt stood at around $30bn as of last September, a level that reflects its policy of growth by acquisition in recent years.
Pearson has just returned to work at Valeant after an extended illness, returning just as the company revealed it was facing an investigation by the US Securities & Exchange Commission (SEC), which has further dented confidence in the company.
Meanwhile, investors in Valeant have faced months of uncertainty amid a congressional investigation into its pricing policy for drugs and a controversial relationship with specialty pharmacy chain Philidor – now dissolved – which is said to have inflated revenues.
On a conference call yesterday, Pearson confirmed that Valeant will be reducing prices for dermatology and ophthalmology products, but gave little insight into the ongoing investigations and the deliberations of an ad hoc committee set up to examine the Philidor relationship.
Valeant now expects sales in 2016 to be in the region of $11bn, well below its previous guidance of around $12.5bn, with earnings per share (EPS) of $9.50 to $10.50. Earlier the company was forecasting 2016 EPS of $13.25 to $13.75.
The company is expecting lower growth in its US dermatology, gastrointestinal and women’s health portfolios, as well as a general reduction in certain geographies such as Western Europe.
In a statement, Pearson said that “the challenges of the past few months are not yet behind us and our goal for 2016 is to better balance our priorities across all of our constituencies – physicians, patients, employees, payors, debt holders and shareholders”.
Ackmann has also pledged continued support for Valeant and said Pershing would take a more proactive role in its dealings with the company following the recent appointment of the investment fund’s Stephen Fraidin as an independent director of the drugmaker.