Valeant Pharmaceuticals on Friday filed its long-overdue U.S. financial report for 2015, plus restated results for several quarters, resolving its default on some of its $30 billion in debt and averting other problems. The badly tarnished Canadian drugmaker also announced a slate of mostly new nominees for elections to its board in June.
The moves initially reassured nervous investors somewhat, briefly nudging up Valeant’s much-depressed share price, but it declined in midday trading.
Valeant’s agreements with its note and bondholders required the company to file its annual financial report with the U.S. Securities and Exchange Commission in March. Missing that deadline led some debt holders to declare Valeant in default and wring higher interest rates out of the company. Further delay could have led debt holders to demand debt repayment far ahead of schedule.
Preventing that was crucial, but for the beleaguered company it basically amounts to successfully knocking out one mole in a months-long Whack a Mole game with no end in sight.
Valeant is dealing with three federal probes into its accounting and business practices, a huge stock-price plunge and insurers demanding bigger discounts from its inflated drug list prices. Just Wednesday, several current and former Valeant officials, grilled by Congress over Valeant’s strategy of buying up older medicines with limited competition and then jacking up their prices many times above prior levels, were forced to apologize for doing so. Valeant’s practice has drawn harsh criticism and promises to rein in pharmaceutical companies from both Democratic and Republican presidential candidates.
Activist investor Bill Ackman and his Pershing Square Capital Management, one of Valeant’s largest shareholders, are attempting a turnaround. The fund recently took over two positions on Valeant’s board of directors, which is replacing J. Michael Pearson, the CEO behind Valeant’s run of serial acquisitions and staggering drug price hikes. That strategy made Valeant a symbol of pharmaceutical company greed and drove its debt to three times its current annual revenue, forcing it to begin looking at which assets it can sell to reduce debt.
On Friday, the company announced a slate of 11 nominees to Valeant’s board, including current member Ackman and incoming CEO Joseph C. Papa, the chairman and CEO of Perrigo Co., another drugmaker. Papa is to take over in early May, while the elections are set for an annual meeting on June 14.
In midday trading Friday, Valeant shares fell $1.46, or 4.1 percent, to $33.79. That’s down about 90 percent from Valeant’s share price peak of more than $260 last August.
Valeant’s financial report filings with the SEC confirm that the Laval, Quebec-based drugmaker was aggressive not just in hiking prices of older medicines, but also in stating revenue prematurely. It didn’t reveal any major new inaccuracies in Valeant’s accounting, but gave a bit of detail on financial misstatements involving two of Valeant’s key brand-name drugs.
Valeant said it has restated its preliminary financial report for 2015’s fourth quarter, reducing by $16 million sales of Addyi, the first pill for boosting female libido. The company will now record Addyi revenue when the drug is sold to patients, rather than delivered to wholesalers. The restatement also reduces by about $5 million sales of Xifaxan, which fights bacterial infections in the intestines, due to estimated returns by wholesalers.
Those changes echo the earlier misstatements that led to government probes and Valeant establishing a temporary committee to review its financial reports and accounting practices.
Valeant disclosed months ago that it improperly reported about $58 million in revenue late in 2014, by recording sales when medicines were delivered to its former partner, now-defunct mail-order pharmacy Philidor, rather than when patients received those medicines. Valeant cut ties with Philidor last fall amid allegations that Philidor created a network of “phantom pharmacies” to steer pharmacy benefit managers toward Valeant’s more-expensive drugs instead of cheaper alternatives.
Valeant’s corrected 2015 financial report states that it had a net loss of $287.8 million, versus net income of $879.4 million in 2014. Revenue totaled $10.45 billion, up 27 percent from a restated $8.21 billion in 2014.
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