Valeant Pharmaceuticals Slashes Revenue, Earnings Guidance

Dec 27, 2015, 00:04

Embattled drugmaker Valeant Pharmaceuticals (VRX) Wednesday lowered its financial guidance for the fourth quarter and full year and issued a more pessimistic outlook for 2016.

Under the 20-year deal, which was announced a day ahead of Valeant's investor day on Wednesday (more on that below), Valeant will also be axing prices on its branded dermatology and ophthalmology franchises by about 10% within the next year, as well as for other branded medications such as the diabetes med Glumetza (whose price Valeant bumped 8-fold after acquiring it).

Shares of Valeant, which is also facing multiple investigations over antitrust violations and drug pricing arrangements, were initially down during pre-market futures trading in NY, but rose up 0.8 percent at $110.50.

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Valeant said it would end its relationship with Philidor on October 30, after reports about tactics Philidor allegedly used to gain more insurance reimbursements for Valeant medicines, including submitting claims using other pharmacies' identification numbers and altering codes on some doctors' prescriptions. Valeant has denied the shortseller accusations and a board committee is investigating the Philidor situation. They have since recovered, helped in part as its largest investor, Bill Ackman's Pershing Square Capital Management, increased its stake. "So that's what we're going to do", Pearson said Wednesday.

Also on the company's November call, one analyst estimated that Valeant could be forced to pay down $3 billion in debt next year. Toenail fungus medicine Jublia, which is one of Valeant's better-known products, is one drug that will be discounted. After the Philidor scandal, Valeant has been in the spotlight to take all the political risk but this move slightly shields it from that risk because of lower prices. We ended our relationship and now we have Walgreens.

Pearson said Walgreens was "courageous" for partnering with Valeant given the negative attention heaped on the company in the last few months. The rally in the stock was on the back of reports that Valeant Pharmaceuticals, had signed a new distribution deal with Walgreens which was seen as a huge positive by traders and investors on the street. He noted the government does not approve of these programs or allow them in healthcare plans like Medicare. Valeant cut ties with that company in October, amid allegations Philidor created a network of "phantom pharmacies" to steer pharmacy benefit managers toward Valeant's more-expensive drugs over cheaper alternatives, and that Valeant executives were involved in running Philidor. The stock had soared past $260 to a new all-time high price as recently as August, but Valeant shares have largely plummeted since then. It predicted no major deals next year but said it hoped to do some small purchases.

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On Tuesday, Valeant announced that it would be partnering with Walgreens to distribute its products, easing some of the fears around how Valeant would replace the sales it lost when it cut ties with Philidor. According to Valeant, those meds will be sold at prices equal to those charged by generics makers, which will cut their sticker costs by 5% to 95%, depending on the brand and the price of rival generics. Analysts have predicted earnings of $14.27 a share and $12.55 billion in sales. The specialty pharmaceutical company reported $2.74 earnings per share for the quarter, beating the consensus estimate of $2.68 by $0.06.

About 22 percent in the ISI Evercore poll expected cash earnings of $6.5 billion and 18 percent expected $6.75 billion.

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