The bad news for Valeant shareholders just keeps coming. After repeatedly cutting its guidance in the past several months, earlier today VRX once again cut guidance dramatically, sending shares plunging by 10% in the premarket. In its just released Q1 results, which missed non-GAAP EPS expectations of $1.37 by 10 cents, the company took the knife to its latest set of full year 2016 projections.
- Total Revenue updated to $9.9 – $10.1 billion from $11.0 – $11.2 billion
- Adjusted EPS (non-GAAP) updated to $6.60 – $7.00 from $8.50 – $9.50
- Adjusted EBITDA (non-GAAP) is updated to $4.80 – $4.95 billion from $5.60 – $5.80 billion
Valeant’s new CEO Joseph Papa blamed the collapse on an ongoing “significant disruption” in the business: “The first quarter’s results reflect, in part, the impact of significant disruption this organization has faced over the past nine months. This has been a difficult period for Valeant and its stakeholders, and while there are some challenges to work through in certain business operations in 2016, such as our U.S. dermatology unit, the majority of our businesses are performing according to expectations.”
Valeant shares have plunged nearly 90% since their peak last August amid a series of concerns, including the price increases, its accounting practices, a brush with potential debt default, and investigations by Congress, the Justice Department and securities regulators. They are now back to just above their multi-year lows.
While the drugmaker in April filed its long-delayed annual report, “defusing the danger of a debt default and positioning the company for a fresh start after concern over its accounting and business practices”, Tuesday’s first-quarter report confirmed that while VRX may have put its solvency concerns aside for the time being, its operations continue to struggle; the release comes before a July 31 deadline required for Valeant to avoid defaulting on its debt agreements.
As the WSJ adds, investors are now watching closely for signs of what kind of profitability Valeant can deliver as it steps away from big acquisitions and hefty drug-price hikes. The earnings report Tuesday is the second since questions about the drugmaker’s relationship with mail-order pharmacy Philidor Rx Services LLC sparked a free fall in the stock and an unraveling of the once Wall Street darling.
“While we recognize that we did not meet the timeline for filing our first quarter results, with our filing expected this week, we will be current in our financial reporting,” said Chief Executive Joseph Papa, who took the helm last month. Still, he noted that the first quarter’s results reflect “the impact of significant disruption this organization has faced over the past nine months.”
In all for the quarter ended March 31 Valeant posted a loss of $373.7 million, or $1.08 a share, compared with a profit of $97.7 million, or 29 cents a share, a year earlier. Adjusted earnings fell to $1.27 a share from $2.05. Revenue rose 9.3% to $2.37 billion.
Following a congressional crackdown on the company’s pricing practices, last month, Valeant said it would expand discounts for a pair of its heart drugs following heavy scrutiny over its pricing tactics, further putting revenues and margins under pressure. Under the changes, effective immediately, hospitals are eligible for a rebate of at least 10% but up to 40% based on the volume of drugs bought during a quarter. The program covers cardiac-care drugs Isuprel and Nitropress, which Valeant acquired in February of 2015 and quickly raised their prices by 525% and 212%, respectively.
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