Valeant stock takes tumble
Quebec-based drug company says market performance will likely continue to worsen
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.
Valeant says it will be investing further in research and development and will be hiring new talent.