Valeant cuts 2016 revenue projections by $1.5 billion
- The troubled Valeant Pharmaceuticals on Tuesday slashed its 2016 revenue forecast by $1.5 billion to $11.0 billion - $11.2 billion, from $12.5 billion - $12.7 billion. Slower growth in its dermatology and gastrointestinal departments, as well as in women's health, weighed on the company's projected growth.
- Under intense criticism on its pricing strategies, the company has canceled "almost all" price increases it had planned for the first quarter. CEO Mike Pearson said all future price increases will be more modest and in line with industry practices.
- Valeant had withdrawn its previously reported 2016 guidance on February 29 as Pearson returned from his two-month medical leave. An ad hoc committee of the board of directors continues to investigate internally on accounting practices tied to the now-defunct Philidor, forcing the ongoing delay in filing Valeant's annual 10-K form.
Since Pearson's return, Valeant has had a turbulent two weeks leading up to this much-anticipated earnings and guidance update. A new SEC investigation surfaced, prompting new investor worries, and the business continued to be under fire for its pricing practices.
Markets quickly soured on the reduced revenue projections, with the stock dropping over 25% in early trading Tuesday.
Pearson acknowledged the recent difficulties but tried to strike an optimistic and forward-looking note. "Our business is not operating on all cylinders but we are committed to getting it back on track," he said on a call.
Highlighting one of the few bright spots in its updated projections, Pearson leaned on the promising early returns in the company's partnership with Walgreens. So far, Valeant has launched its access program with the major pharmacy chain for its dermatology and ophthalmology businesses, along with its female libido drug Addyi. After two months, roughly 30% of dermatology prescriptions are flowing through Walgreens.
In the nearer term, Valeant also cut its projection for revenue in Q1 due to greater than expected reductions in inventory among wholesalers and retailers, and its transition from Philidor to Walgreens. The company now forecasts $2.3 billion to $2.4 billion in revenue, a roughly 20% drop from its previous guidance of $2.8 billion to $3.1 billion.
However, the continued delay of the company's 10-K filing may begin to have real consequences. If the 10-K report is not filed by April 29, Valeant would in breach of its reporting contract. Executives on an investor call Tuesday said the company would work with lenders to extend the time period for delivery. However, holders of more than 25% of any note series may receive a notice of default if the filing continues to be delayed, according to Reuters.
Addressing this, Pearson relayed a statement on the ad-hoc committee's continued investigation. "The ad hoc committee has completed a substantial amount of work related to Philidor and certain accounting and reporting matters. The committee and its advisers are working diligently and hope to complete its work in the near future."
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