Valeant’s forecast for 2016 more grim
But shares rise even as drugmaker issues downbeat projections
Embattled drugmaker Valeant Pharmaceuticals on Wednesday lowered its financial guidance for the fourth quarter and full year and issued a more pessimistic outlook for 2016.
The downbeat projections, issued just ahead of a presentation to investors and financial analysts, reflected fallout from the company’s recently scrapped partnership with Philidor Rx Services, the specialty pharmacy that helped Valeant sell its medications through a network of pharmacies and win insurance reimbursements.
Valeant shares closed 8.1% higher at $118.47 despite the grimmer forecasts. The stock has lost nearly 55% of its value since early August amid criticism and investigations of the Canadabased firm’s business practices.
Valeant said it now expects fourth-quarter earnings per share between $2.55 and $2.65, down from the $4 to $4.20 previously forecast. The forecast fell well short of the $3.47 per share expected by Wall Street analysts.
Valeant projected total revenue of $2.7 billion to $2.8 billion for the quarter, lower than the $3.25 billion to $3.45 billion guidance previously issued.
The drugmaker forecast fullyear adjusted earnings per share of $10.23 and $10.33 on total revenue of $10.4 billion to $10.5 billion. The change marked a drop from earlier guidance of $11.67 to $11.87 earnings per share on total revenue of $11 billion to $11.2 billion.
Looking toward 2016, Valeant said it expects total revenue of $12.5 billion to $12.7 billion, with adjusted earnings per share of $13.25 to $13.75. Financial analysts had expected $12.55 billion in projected revenue and earnings per share of $14.27.
The firm outlined plans for approximately $2.25 billion in debt reduction in 2015 as it seeks an investment-grade credit rating.
Valeant, which in the past has grown swiftly through corporate acquisitions, also said it expects to double same-store sales in 2016, primarily driven by increased sales volume. That projection came one day after the company announced a new distribution deal with pharmacy chain giant Walgreens and agreed to slash its medication prices.
The consignment agreement calls for Valeant to retain ownership of medications until they are dispensed to patients. The deal includes plans to cut wholesale prices of Valeant’s branded prescription therapies in dermatology and ophthalmology by 10%.
Financial analysts quizzed Valeant officials about the Walgreens deal during the investor presentation, questioning whether it would pass muster with pharmacy benefit managers.
J. Michael Pearson, Valeant’s CEO and chairman, said he expected the program to succeed, in part because it would cut drug inventory storage costs for Walgreens.
Valeant’s Philidor partnership became a liability in October when a short-seller’s report accused the drugmaker of creating “phantom accounts” as part of what he alleged was a “fraud to create invoices to deceive the auditors and book revenue.”
Valeant denied the allegations, calling them an effort to drive down the firm’s stock price.