Valeant confirms SEC probe; stock takes another 18.4% hit
Shares of Valeant Pharmaceuticals plunged anew Monday as the embattled drugmaker confirmed it is under investigation by the Securities and Exchange Commission and issued other downbeat financial news.
Investors sent the company’s stock down 18.41% to a $65.80-ashare close. Valeant shares have lost nearly 75% of their value since they reached a $262.52 high on Aug. 5.
The company confirmed the SEC investigation along with previously-disclosed probes by federal prosecutors in Massachusetts and New York, as well as by Congress. Valeant “received a subpoena from the SEC in the fourth quarter of 2015,” it said in a statement. “We do not have further detail to provide at this time.”
The investigation would have been disclosed with its annual report, Valeant said, but it postponed that filing last week.
The disclosure and stock plunge came hours after Canada-based Valeant said its CEO, J. Michael Pearson, is returning from a leave of absence that began in late December. Pearson spearheaded the company’s rapid expansion-through-acquisitions strategy.
Separately, Moody’s Investor Services on Monday placed approximately $31 billion of Valeant debt under review for a potential ratings downgrade.
Howard Schiller, the former Valeant chief operating officer who served as interim CEO in Pearson’s absence, will transition out of that post but remain as a
member of the company’s board of directors.
Valeant said it has separated the roles of company chairman and CEO, giving board member Robert Ingram the chairman role. The timing of Pearson’s return prompted a postponement of the previously scheduled Monday conference call to discuss preliminary fourth-quarter financial results with shareholders and Wall Street analysts. Valeant said the call would be rescheduled “in the near term.”
The drumbeat of financial challenges followed Valeant’s announcement last week that it would delay filing its annual report with the SEC pending completion of an ad hoc committee’s examination of the company’s with Philidor Rx services, a specialty pharmacy company that distributed the drugmaker’s medications.
Valeant also said last week it would restate $58 million of the company’s financial earnings from late 2014 into 2015 based on preliminary results of the internal review.
The drugmaker cut ties with Philidor in late October after a report issued by activist short-seller Andrew Left’s Citron Research accused Valeant of creating an apparent “network of phantom captive pharmacies” to steer pharmacy benefit managers to Valeant’s more expensive drugs instead of less-costly alternatives.
The report also alleged Valeant created “phantom accounts” as part of a purported “fraud to create invoices to deceive the auditors and book revenue.”
Valeant denied the allegations, characterizing them as an effort to drive down the company’s stock value.
Morningstar analyst Michael Waterhouse wrote in a Monday note that the drugmaker’s withdrawal of financial guidance and delay of the earnings call “suggests there might be more pain ahead as the company continues to struggle with fallout from its discontinued relationship with Philidor” and works to rev up a new prescription distribution agreement with pharmacy giant Walgreens.
The stock plunge came hours after Valeant said its CEO, J. Michael Pearson, is returning from a leave of absence that began in late December.