Valeant Pharmaceuticals shares took a huge hit on Tuesday, plunging more than 50 percent. In an investors’ briefing, the company said it cut its 2016 revenues and earnings forecast more than expected.
The Canadian drug maker offered a beleaguered financial outlook: it could be in danger of defaulting on its $30 billion debt.
Valeant has been in the headlines recently, with a focus on its business practices. Last fall, the drug maker was accused of using a specialty pharmacy to manipulate insurance reimbursements on its highly profitable dermatology drugs. Two large pharmacy benefit providers, CVS and Express Scripts, cut ties with Valeant in October. And in February, Congress took on Valeant for extensively increasing the costs for two cardiovascular drugs on the very same day it bought them.
The two-hour conference call was led by Chief Executive Michael Pearson, who had been on sick leave for two months, before returning last month.
Before the conference call ended, some analysts were already recommending investors leave. “Valeant results…are worse than we feared,” said a Wells Fargo analyst, in an investor note.
Valeant’s stock was at a high of $263.70 in August and was down 50 percent at $34.54 in Tuesday’s trading, its biggest decline ever, reported Reuters.
Among the investors most affected was William Ackman, who lost around $1 billion on Tuesday alone.
If Valeant fails to file its 10-K, already two weeks late, by April 29, its bank lenders could demand accelerated loan payments. If it’s still not filed by mid-May, investors could do the same, resulting in a default on its $30 billion debt.
Valeant’s CEO fielded questions during the briefing, saying the drug maker’s forecasts were dialed back partly because of lowered expectations for gastrointestinal and dermatology drugs.
“In terms of management credibility, we have to earn it,” said Pearson, in a Wall Street Journal article. “We have to do a better job. We’ve had some underperforming businesses, that’s on us…so it’s a bit of a starting-over point at this point for me in the company and clearly if we don’t deliver again, that’s on me.”
Filed Under: Drug Discovery