Valeant Posts a Loss, Says It Will Retool--Update
Today 8:28 AM ET (Dow Jones)Print
By Anne Steele
Valeant Pharmaceuticals International Inc. posted a wider loss in its latest quarter, and the company said it would reorganize, continuing a push to remake itself as a normal pharmaceutical firm.
The company also affirmed its yearly guidance after a string of cuts, easing fears of triggering a debt-covenant breach. Shares in the company added 6% premarket to $23.80.
It has been just over a full year since Valeant shares hit an all-time closing high. Since that peak last August at $262.52, the stock has erased more than 90% of its value amid a slate of concerns, including drug-price hikes, accounting problems, a brush with a potential debt default, and investigations by Congress and federal regulators.
Investors have been watching for signs of what kind of profitability Valeant can deliver as it distances itself from big acquisitions and severe price increases for its drugs, the method it used to build its business.
Chief Executive Joseph Papa, who took the helm from Michael Pearson in May, said Valeant would be going in a "new strategic direction" that involves reorganizing the company and its reporting segments.
Valeant said in an investor presentation that, as part of its reorganization, it is looking at potential alternatives for some non-core businesses with revenue totaling more than $2 billion. Through asset sales and cash flow, the company said it looks to shore up its balance sheet by cutting its debt by more than $5 billion over the next year and a half.
"We continue to make progress towards stabilizing the organization," Mr. Papa said. "Although it will take time to implement and execute our turnaround plan, I am confident that we will show progress in the coming quarters."
For the quarter ended in June, Valeant posted a loss of $302.3 million, or 88 cents a share, wider than its loss of $53 million, or 15 cents a share, a year earlier.
On an adjusted basis that strips out some costs and uses a new tax-reporting method, earnings fell to $1.40 a share from $2.14. Revenue slid 11% to $2.42 billion. Analysts were looking for adjusted earnings of $1.48 a share on $2.46 billion in revenue, according to Thomson Reuters.
Valeant backed its guidance for the year -- which it had cut sharply in June -- for earnings of $6.60 to $7 a share and revenue between $9.9 billion and $10.1 billion. By backing its guidance, Valeant essentially said it thinks it can earn enough to keep its financial ratios in compliance with its debt covenants.
But Evercore analyst Umer Raffat points out the lower-than-consensus results in the second quarter mean business has to improve in the second half to meet guidance. And some important segments struggled in the latest quarter.
Dermatology revenue more than halved while ophthalmology skidded 25% lower. Neurology and branded generics revenue slipped 11%; gastrointestinal fell 10%.
Developed-market revenue fell 14%, mostly owing to lower pricing. Valeant has faced fierce criticism for its drug pricing after The Wall Street Journal reported in April last year that the company had raised the prices of Isuprel and Nitropress, two cardiac-care drugs, by 525% and 212%, respectively, after acquiring the rights to the medicines.
In May, Valeant said it would expand discounts for the pair of heart drugs following heavy scrutiny over its pricing tactics. It has also formed a committee to determine drug prices.
Valeant also said it reached a deal to sell all North American commercialization rights to angioedema treatment Ruconest to Pharming Group NV for $60 million upfront and additional sales-based milestone payments of up to $65 million.