With CEO Pearson set to bow out, Valeant files much-delayed annual report
- Valeant Pharmaceuticals on Friday filed its much-delayed annual report with the Securities and Exchange Commission, potentially lowering the risk of default brought on by the overdue documents.
- Several bondholders had sent notices of default to the company in April, triggering a 60-day window for Valeant to resolve the default. With this filing, the company said it had resolved the default under its senior notes "in all respects."
- An investigation into improper accounting tied to the specialty pharmacy Philidor had held up the report, known as a Form 10-K. Valeant had preliminarily identified misstated financial reports which would lower 2014 revenue by $58 million. The report filed Friday confirmed that figure.
The overdue annual report has been a significant roadblock for Valeant as it attempts to move on from a disastrous first quarter. After missing the original deadline of March 15, Valeant risked default on its credit facility and senior notes by not filing.
In early April, Valeant was able to win an extension on the deadline tied to its credit facility. But in order to convince creditors, the company was forced to increase the interest rate on its relevant loans by 1% until it delivers its financial statements for the second quarter of 2017.
Bondholders had separately sent the company notices of default in April, which Valeant says it now has resolved. But the company may receive similar notices in the future if it is unable to file its first quarter report on time. Under the agreement with creditors, Valeant received an extension until July 31 to file that report but bondholders could pursue their own actions.
Valeant also revealed new information regarding the many investigations currently examining the company. The U.S. Attorney's Offices for the District of Massachusetts and Southern District of New York are looking into Valeant's patient assistance programs and its former relationship with Philidor.
The Securities and Exchange Commission is also investigating the Philidor matter while the Senate Aging Committee and House Oversight Committee are probing the company's pricing practices.
In a hearing Wednesday, senators on the Aging Committee sharply censured the company for price-gouging and shutting out patients from needed treatments. Outgoing CEO Michael Pearson expressed regret over the aggressive price increases and said the company was moving away from a strategy rooted in acquiring older drugs and hiking prices.
Also testifying at that hearing was Howard Schiller, Valeant's former chief financial officer and current board member. The company has accused him of improper conduct and asked him to step down for his post on the board, which he has refused to do.
In the documents filed Friday, Valeant said Schiller's conduct contributed to the misstated financial results, suggesting a pressure-filled "tone at the top" may have caused Schiller to provide incorrect information. Schiller denies any wrongdoing.
Under pressure from new board member Bill Ackman, Valeant is working to overhaul the leadership of the company. Pearson is on his way out, and new CEO Joseph Papa will likely start work on Monday. Additionally, four new directors may join the Board, according to a report from The Wall Street Journal. This would bring the number of new directors in the past two months up to 8, over half of the board's membership.
Papa will have a cleaner slate now that Valeant has finally filed its report, but other challenges will likely continue.
- Wall Street Journal Valeant Files Overdue Annual Report, Easing Risk of Default
Follow Ned Pagliarulo on Twitter