Shares of Valeant Pharmaceuticals International plunged Tuesday morning in their worst day ever, falling 51 percent after the company cut its 2016 forecast, reported a weak fourth quarter and said it risked breaching some of its debt agreements if it can’t file its annual report in time.
During a two-hour call with analysts, CEO Mike Pearson was questioned about why he was the right man to lead the drugmaker. Adding to the company’s problems, during the call it corrected its news release issued hours before, saying that one measure of earnings actually would be lower than it had stated.
“How can we be confident in what you’re saying about the business, given you were positive in December and January?” said Shibani Malhotra, an analyst with Nomura Securities who has been bullish on the stock, with a buy rating and a $175 price target. “How do we get comfortable that Valeant is able to execute and deliver for shareholders?”
The shares closed down more than 51 percent at $33.54. In July it was as high as $257.53.
“We have to earn back the credibility,” Pearson said in his first public remarks since returning from a medical leave two weeks ago. “We have to deliver on results. We have to meet or exceed this guidance. It’s a bit of a starting-over point for me and this company.”
Laval, Quebec-based Valeant is at risk of violating its debt agreements, putting it at the mercy of its creditors, because it will be late filing its annual report. Valeant said it must file its 10-K by March 30 to avoid triggering cross-defaults that would restrict it from being able to further tap its credit line.
It won’t be able to meet that deadline and will begin asking lenders next week to amend the credit agreement so that a default is waived.
Earlier Tuesday, Valeant gave new sales and earnings forecasts for 2016.
Dermatology and gastrointestinal drugs, which until recently were key growth drivers, are falling short. Pearson said he’s not planning any major asset sales but might divest smaller businesses this year to help pay down debt, which has ballooned to more than $30 billion.
Fourth-quarter sales were $2.8 billion. Profit, excluding certain items, was $2.50 a share. Because the company has said it will restate several quarters of earnings related to mail- order pharmacy Philidor Rx Services LLC, the results might not compare with analyst estimates or prior quarters.
