Double whammy: Valeant stock hammered on Philidor accounting issues, CVS Jublia restrictions
- Valeant Pharmaceuticals' stock fell 11% by Monday's market close (and about 20% since Friday's close) as the company was hit with a barrage of bad news concerning its drug pricing, distribution models, and internal accounting. Shares have risen about 9% in early Tuesday trading, but are still down more than 60% since last fall.
- First, Wells Fargo last Friday slammed the company with a grade of "underperform" over a variety of business and management decisions which have thrown Valeant for a loop. "We believe the Valeant board and management have made decisions that may have put Valeant at significant business and reputational risk," wrote analyst David Maris.
- Then, on Monday, Valeant announced that it would likely have to restate past earnings statements after an internal audit raised concerns over accounting practices related to its former distributor (and now defunct specialty pharmacy) Philidor Rx.
- Finally, CVS Health said that its Caremark benefits manager unit will be slapping restrictions on the drugmaker's pricey toe fungus dermatology medication Jublia, which runs $1,000 for an 8-mm bottle.
Talk about a terrible, horrible, no good, very bad day.
Valeant hasn't exactly had the most pleasant 12 months between ongoing controversies concerning its drug pricing model, its now-defunct and controversial relationship with specialty pharmacy and distributor Philidor Rx, and Congressional grilling of top Valeant execs like interim CEO Howard Schiller over generic med price hikes.
As Monday's events underscore, issues of that magnitude have the potential to persist despite management's best efforts to staunch the bleeding. Investors had already begun to fret last week in the wake of the Wells Fargo rating and Valeant's tardiness in announcing Q4 2015 and full year 2015 earnings.
In a statement Monday, Valeant explained the reason for the delay. The company said that it had found "approximately $58 million" in previously reported net revenues that shouldn't have been included in financial reports after an internal review, and that correcting those mistakes would reduce reported 2014 EPS by about $0.10.
"This determination and the need to delay our 10-K filing are very disappointing but necessary," said Schiller in a statement. "We remain committed to improving reporting procedures, internal controls and transparency for our investors."
The drugmaker promised that it would be issuing an investor update on February 29 and that it would be seeking a filing extension from regulators.
"The last few months have been challenging on many levels," Schiller continued. "We have made mistakes in the past and our focus today is on executing our business plan and rebuilding trust."
But it wasn't just past issues that came back to haunt Valeant yesterday. CVS' decision to drive patients to cheaper toe fungus medications before allowing them to access Jublia (part of an ongoing crackdown by the PBM on expensive dermatology drugs) delivered a tangible, present tense blow to the company, too.
One potential bright spot for Valeant is its 20-year distribution deal with CVS competitor Walgreens, which the company has cited as one major example of its efforts to change and improve.
- Valeant Valeant Ad Hoc Committee has Made Substantial Progress in Its Review of Philidor and Related Accounting Matters
- Bloomberg CVS Targets Valeant’s $1,000 Fungus Drug With Restrictions
- BioPharma Dive How top Valeant & Turing execs defended their drug prices to Congress
- BioPharma Dive Damaging House memos reveal calculated drug price increases at Turing, Valeant