Valeant stock takes tum­ble

Que­bec-based drug com­pany says mar­ket per­for­mance will likely con­tinue to worsen

Toronto Star - - BUSINESS - ROSS MAROWITS

MONTREAL— Valeant shares hit a sixyear low Tues­day af­ter the em­bat­tled drug gi­ant sig­nalled that its fi­nan­cial per­for­mance will con­tinue to de­te­ri­o­rate next year fol­low­ing an ap­prox­i­mate $1.63-bil­lion loss in the third quar­ter and ex­pec­ta­tions of more red ink to come.

The Laval, Que.-based phar­ma­ceu­ti­cal com­pany saw its stock tum­ble as it also cut its fore­cast for this year, say­ing it ex­pects a weaker fourth quar­ter.

Joseph Papa, who was brought in as CEO and chair­man ear­lier this year to turn Valeant around, re­cited a litany of prob­lems con­fronting what was once the most valu­able com­pany on the Toronto Stock Ex­change.

“We con­tinue to need to ad­dress le­gacy is­sues, in­clud­ing neg­a­tive press cov­er­age, lit­i­ga­tion and tal­ent re­ten­tion and sev­er­ance,” Papa told in­vestors on a con­fer­ence call. “In sum­mary, we face some chal­lenges, but we are tak­ing spe­cific ac­tions that will put us on the right track.” He said some of the mea­sures Valeant is tak­ing in­clude fur­ther in­vest­ments in re­search and devel­op­ment as well as hir­ing new tal­ent.

“While it’s clear we still have more work to do, I be­lieve we have the right team in place and are on the right path for­ward.” Valeant low­ered its 2016 es­ti­mates. The fore­cast for ad­justed earn­ings has been cut about 20 per cent to be­tween $7.06 and $7.32 per share, with rev­enues be­ing trimmed to be­tween $12.7 bil­lion and $12.9 bil­lion.

While in­dus­try an­a­lysts were ex­pect­ing that re­vi­sion, they were caught off-guard by early warn­ings about 2017, said Dou­glas Miehm of RBC Cap­i­tal Mar­kets.

In morn­ing trad­ing on the Toronto and New York stock mar­kets, Valeant shares plum­meted to lev­els not seen since mid-2010.

Its shares lost around 20 per cent of their value in Toronto at $20.28 af­ter hit­ting a low of $18.41.

That came af­ter it re­ported a $1.62bil­lion loss in the three-month pe­riod ended Sept. 30, which was mainly tied to a $1.4-bil­lion good­will im­pair­ment charge for the Salix stom­ach drug busi­ness it ac­quired last year.

The com­pany said it faced un­ex­pected chal­lenges in the third quar­ter, in­clud­ing weak­ness in its der­ma­tol­ogy busi­ness.

Any im­prove­ments in its core busi­ness next year are ex­pected to be over­whelmed by the ex­piry of patents in its neu­rol­ogy di­vi­sion and in­creased com­pe­ti­tion for some of its generic drugs, it said.

Valeant said its net loss con­trasted with a profit of $65.9 mil­lion in the third quar­ter of 2015. Rev­enues fell 11 per cent to $3.3 bil­lion.

Ex­clud­ing one-time items such as the Salix write down, Valeant earned $722 mil­lion, or $2.06 per share.

A year ago, ad­justed profits were $1.12 bil­lion, or $3.21 per share.

Valeant ex­pects to pay down more than $6.65 bil­lion of debt by early 2018 with pro­ceeds from as­set sales.

Chief fi­nan­cial of­fi­cer Paul Heren­deen said the com­pany prefers to keep core as­sets such as eye care, der­ma­tol­ogy, gas­troin­testi­nal and con­sumer prod­ucts, but won’t do so at all costs.

“If we be­lieve an as­set may be worth more in some­one else’s hands and they’ll pay us more than what it may be worth in our hands, we should sell that as­set,” he told an­a­lysts.

RYAN REMIORZ/THE AS­SO­CI­ATED PRESS

Valeant says it will be in­vest­ing fur­ther in re­search and devel­op­ment and will be hir­ing new tal­ent.

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