Former Wall Street darling Valeant Pharmaceuticals International Inc., now more of a dog for its reviled strategy of huge drug price hikes, posted dismal third-quarter results and sharply reduced its profit forecast for 2016, driving down its stock price.
The Canadian drugmaker, the target of multiple government probes over its pricing practices and questionable financial reporting, on Tuesday reported a third-quarter loss and missed the Street’s profit expectations by a wide margin. That was mostly due to payer demands for bigger price rebates and a related $1.05 billion charge for writing down the value of assets, mainly its Salix stomach disorders business, which it plans to sell.
The Laval, Quebec-based drugmaker lost $1.22 billion, or $3.49 per share, after posting a profit a year earlier. Earnings, adjusted for one-time items, came to $1.55 per share, far below the $1.78 analysts expected.
Revenue fell 11 percent to $2.48 billion, just below the $2.49 billion analysts anticipated, due to a mix of lower product sales and discontinuations.
Valeant shares plunged 20 percent, or $3.76, to $15.37 in morning trading.
Shares had peaked at about $263 in August 2015, right before its business practices came under public and Congressional scrutiny.
Despite all the bad news and looming generic competition this year and next that will slash revenue from at least four products, Valeant executives told analysts during a conference call that they are making progress in turning the company around – without resorting to more price hikes – and have a plan for reducing its long-term debt totaling $30.4 billion.
“We do think that there are growth opportunities in our business,” new CEO Joseph Papa said. “We do not need to sell assets to be OK on a liquidity basis.”
However, the maker of Bausch and Lomb eye care products plans to sell some noncore products, reduce operating costs to save up to $100 million next year, boost marketing and launch some new medicines, while sticking to single-digit price hikes in the future. Papa has brought in a new chief financial officer and hired a chief quality officer.
Valeant is the target of at least 11 investigations in the U.S. and Canada, and a number of class action lawsuits. The company has been under fire for its strategy of buying smaller drug companies, then hiking the prices of the drugs that those companies make. Earlier this year, Valeant ousted Michael Pearson, the CEO who engineered that strategy, replacing him with Papa.
Valeant slashed its full-year profit forecast to between $5.30 and $5.50 per share, down from $6.60 to $7 per share. Revenue is expected to range from $9.55 billion to $9.65 billion, down from $9.9 billion to $10.1 billion.
Evercore ISI analyst Umer Raffat wrote to investors that the revenue guidance indicates Valeant expects sales in the fourth quarter to decline 8 percent from the third quarter, to nearly $2.3 billion.
Valeant did not give a 2017 financial forecast, but Raffat wrote that information provided during the conference call indicates Valeant expects 2017 revenue and profit before deducting taxes and other costs to come in below its 2016 results.
Filed Under: Drug Discovery