Valeant ‘turnaround’ looks more like slow decline as sales fall

Valeant Pharmaceuticals International Inc.’s CEO said in late 2016 that he saw running the drugmaker as the “turnaround opportunity of a lifetime.” That’s not what Wednesday’s quarterly results suggest.

On Wednesday, the company said that fourth-quarter sales fell 10 per cent from a year ago, with lower revenue in all three of its major units. Its forecast for 2018 isn’t much better, with sales and profit projections coming up short of what analysts had expected.

Chief executive Joe Papa took over in 2016 after the previous management was ousted. The drugmaker had faced intense public scrutiny of its business practices, including its relationship with a specialty pharmacy, its aggressive approach to raising prices of drugs it acquired, and the large debt it piled up as it did deal after deal, boosting it into the ranks of the world’s largest drug companies.

Papa has sold off some of the assets acquired in that deal binge, and paid down a chunk of what it owes to creditors.

“We’re committed to growth through strategic investment in our core businesses, key products and late-stage pipeline,” Papa said in the statement Wednesday. “These will get us to the final phase of our strategic plan — the transformation of Valeant.”

While he’s put the company on steadier footing, that transformation may not end up being of the caterpillar-to-butterfly type. Valeant projected that sales next year will be between US$8.1 and US$8.3 billion, about what they were in 2014.

The shares fell as much as 12 per cent in their biggest intraday drop since December, and closed at US$16.39 in New York.

‘“While Valeant is managing to slow the declines, we do not see growth from new products being able to replace the declines in some of the key business lines,” said Prakash Gowd, an analyst with CIBC Capital Markets.

Starting this year, Valeant said it expects new products to make up a growing portion of its sales.

In a slide called “Return to Growth,” a coloured bar chart, not labelled with any dollar amounts or percentages, appears to show rising overall sales starting in 2018, with new products making up about a third of revenue by 2021.

Chief financial officer Paul Herendeen said that before the analysts get out “their micrometers,” that “the information was not to scale.”

Valeant has partly mitigated one of its biggest risks. Papa said that the company has paid down about 20 per cent of what it owed since the end of first quarter of 2016, in part by selling assets.

Papa said the company remained focused on “resolving legacy issues and derisking the balance sheet.”

In a presentation to investors Wednesday, Valeant said it had US$25.7 billion in debt at the end of the year, down from US$30.2 billion at the end of 2016.

Its dermatology products, once one of Valeant’s biggest drivers of growth, are struggling as well. The company is seeing “lower volumes and net realized prices than in the past,” Herendeen, the CFO, said on the call.

He blamed the decline for what he called changes in the dermatology market since the drugmaker acquired the therapies.