Valeant stock tumbles after income-loss report
Just when things didn’t seem like they could get any worse for Valeant Pharmaceuticals International Inc., its disappointing third-quarter earnings report shows it hasn’t yet hit bottom.
Valeant’s stock was eviscerated Tuesday morning as it became clear the Laval, Que.-based drugmaker’s turnaround under new management is taking longer than expected. The stock lost more than 25 per cent in Toronto just minutes after markets opened after Valeant reported an income loss and again cut its full-year guidance.
The company says it now expects its 2016 revenue to be in the range of US$9.55- to $9.65-billion, down from between US$9.9- to $10.1-billion.
“Valeant is a company in transition. This is a turnaround, and as with many turnarounds, improvements can sometimes take longer than expected,” said Valeant CFO Paul Herendeen on an investor call Tuesday.
Net loss in the third quarter was US$1.22 billion, compared with a net income of US$49.5 million during the same period last year. The company took a US$1.05-billion goodwill impairment charge to write down the value of some U.S. businesses including Salix, which makes its “blockbuster” top-selling gastrointestinal treatment Xifaxan.
The disappointing quarter shows Valeant is on a weak trajectory, says Wells Fargo analyst David Maris, adding that the company carries too much risk to recommend it as an investment.
“We had assumed Valeant would experience some tailwinds from pricing, higher rebates, and increased prior-authorizations; however, it appears Valeant’s core business continues to deteriorate, as we had feared,” Maris wrote in a note to clients. “We do not quite understand how a business that spent more than US$15 billion to acquire assets experiences deteriorating cash generation.”
Although the new management under new CEO Joseph Papa says it would rather leave the troubled past behind, the company warned of more troubles ahead in 2017 as it loses exclusivity over the next 1218 months on products Evercore ISI analyst Umer Raffat estimated add up to about US$800 million.