Valeant turnaround still a fantasy
- Valeant Pharmaceuticals International Inc. announced sales of $2.23 billion for the second quarter as the company continues plodding toward a turnaround.
- CEO Joe Papa highlighted during a call Tuesday morning with analysts that the drugmaker is ahead of schedule in paying down its debts — reducing them by $4.8 billion since the first quarter of 2016 — and that it will have no debt maturities and no mandatory amortization requirements until 2020.
- While the company tried hard to paint a rosy picture, it was hit hard by divestitures and loss of exclusivities. It reported a reduced net loss for the quarter of just $37 million, compared to a loss of $677 million in the year ago period.
It was a bad sign heading into its earnings call on Aug. 8 that Valeant announced its latest Complete Response Letter (CRL) from the Food and Drug Administration due to manufacturing issues at a plant in Tampa, FL. This CRL for its latanoprostene bunod ophthalmic solution from its Bausch & Lomb business was just the most recent setback for the company in what has been years of problems, scandals and declining sales.
While CEO Papa, who has been with the company a little over a year, tried to reassure investors that the problem was not with the safety or efficacy of the drug, but strictly with the Tampa plant. The manufacturing issues have been plaguing the company for some time, but largely stand as one of Valeant's smallest issues. Papa said the company has added to its quality control team and is having discussions with the FDA to fix the problems.
Beyond manufacturing troubles, legal problems have been dogging Valeant. And again Papa tried to downplay the slew of "legacy lawsuits" that are still outstanding, including a securities class action lawsuit related to its Salix business, investigations related to the Philidor matter, as well as inquiries from the U.S. Senate Special Committee on Aging and U.S. House Committee on Oversight and Government Reform relating to pricing.
"We've cleared up a number of important issues legacy legal issues and we continue to work toward resolving those for the future, and that will really be out focus for the next few months, for the next year," said Papa.
But the hits just keep on coming. The dermatology business, which was once a jewel in the Valeant portfolio, can now be described as struggling, at best. In efforts to turn it around, the company renamed it in July to Ortho Dermatologics and launched the psoriasis drug Siliq (brodalumab). Yet, the unit is bogged down by loss of exclusivities (LOEs).
"With respect to the LOEs, our hope is that the LOEs continue to get pushed out and we gain more revenue and therefore cash flow into 2017. When they go generic or lose exclusivities, its a growth drag," said Paul Herendeen, Valeant's Chief Financial Officer.
"It's not going to happen over night, but we're excited about what we see for the future," Papa added as he closed the call.
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