Post-Earnings Coverage Valeant Pharma under the Microscope

Valeant Pharmaceuticals Slumps after cutting its Forecast

LONDON, UK / ACCESSWIRE / June 8, 2016 / ActiveWallSt.com announces its post-earnings coverage on Valeant Pharmaceuticals (NYSE: VRX). The company announced its Q1 FY16 result on Tuesday, June 07, 2016. For Q1 FY16, Valeant posted a loss of $373.7 million, or $1.08 per share, as compared with a profit of $97.7 million, or $0.29 per share in Q1 FY15. Earnings, adjusted for one-time gains and costs, fell to $1.27 a share from $2.05 in Q1 FY15 and well below the Analysts’ consensus estimate of $1.42. Register with us now for your free membership and see our complete reports on these equities at:

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The Canadian drug maker reported revenue of $2.37 billion, up 9.3% on y-o-y basis, beating analysts’ consensus estimate of $2.35 billion. Meanwhile, the company’s organic sales declined by $289 million in Q1 FY16. Selling, general and administrative expenses (SG&A) climbed to $620.2 million in Q1 FY16, from $507.9 million in Q1 FY15. Research and development (R&D) costs increased to $103.1 million in Q1 FY16 from $55.8 million in the year ago period.

Valeant also announced a cut in its earnings and revenue forecast for fiscal year 2016. The embattled drug maker now expects earnings of $6.60 to $7.00 per share for FY16, down sharply from its last guidance in March, 2016 for $8.50 to $9.50 per share. The company expects revenue in the range of $9.9 billion to $10.1 billion, below the previous forecast of $11 billion to $11.2 billion announced in March 2016.

Pain-full trail

Shares of the Canadian drug maker plummeted on Tuesday, June 07, 2016, as new CEO Joseph Papa cut FY 16 earnings and sales forecasts, marking a major reset point for the once celebrated company. Valeant’s has grown at a break neck speed for years, fuelled by its strategy of acquiring smaller companies making niche drugs and subsequently raising prices, bypassing the huge research and development investments, typical for the pharmaceutical industry.

The company acquired two heart drugs, Isuprel and Nitropress, and subsequently increased their prices by 525% and 212%, respectively, creating outrage in patients and hospitals relying on these drugs. However, the company’s approach has faced scrutiny from federal prosecutors, lawmakers as well as its own investors as customer raised concerns of the increased drug prices. Valeant is not alone in this practice with companies such as Gilead Sciences (NASDAQ: GILD) and Turing Pharmaceutical also increasing prices of life saving drugs in what many call unethical moves.

Valeant had a close brush with defaulting, as the company underwent federal investigations regarding its business and accounting practices. The company posted long-overdue results from 2015 in April 2016. During the same month, CEO J. Michael Pearson was rebuked in a congressional hearing, where lawmakers accused Valeant of short changing patients to reward the market makers. The Laval, Canada-based company disclosed, last week, that it had been served with default notices from two of its bond holders because of the postponement of the Q1 FY16 earnings report.

The company’s Q1 FY16 earnings results showed how challenging the task at hand will be for Mr. Papa, who joined from generic drugmaker Perrigo Company PLC (NYSE: PRGO) in May, 2016. Two of Valeant’s major sales contributors, dermatology and prescription ophthalmology, have declined by 43% and 30%, respectively. The company has faced resistance from pharmacy benefit managers and health insurers after steeply increasing its drug prices especially in dermatology. Another crucial task falling on Mr. Papa’s shoulders will be to regain the trust of its lenders. The long-term term debt, which skyrocketed under his predecessor, rose to $31.1 billion as of March 31, 2016 from $30.3 billion in December 2015.

Technicals

Valeant’s shares, which recorded a high of $263 in August 2015, fell below $25 post the recent earnings announcement. The stock closed down 14.59% at $24.64 on the NYSE, its lowest close since November 2010. Valeant’s stock has slumped 75.76% since the beginning of the year, while it has down 89.37% in the last 12 months.

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