As Valeant Drops $6 Billion+ in Value Over Four Days, Report Shows Interim CEO Used Company Jet for Vacation
February 23, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Embattled Valeant Pharmaceuticals saw its stock plunge in overnight trading as the company continues to face a myriad of problems, including most recently the company’s planned restating of its earnings report following an internal review.
In a statement issued Feb. 22, Valeant said an ad hoc committee delved into the company’s involvement with specialty pharmacy Philidor Rx Services that provided a number of the company’s prescription medications. According to the statement, Valeant said it believes approximately $58 million of net revenues reported in the second half of 2014 “should not have been recognized upon delivery of product to Philidor.” Correcting the misstatements is “expected to reduce reported 2014 GAAP EPS by approximately $0.10 and increase 2015 GAAP EPS by approximately $0.09,” Valeant said. As a result of the restatement, Valeant said it was expecting a delay in the filing of those financial reports.
“This determination and the need to delay our 10-K filing are very disappointing but necessary,” Howard Schiller, interim chief executive officer, said in a statement. “We remain committed to improving reporting procedures, internal controls and transparency for our investors.”
Valeant said it plans to host a conference call on Feb. 29 to “discuss unaudited financial results for the fourth quarter of 2015, and provide a business update.”
This misstatement of earnings, plus other scandals involving Philidor, have caused investors to rethink Valeant stock, which has heed more than $6 billion in market value since Thursday, Toronto’s National Post reported Monday. Wells Fargo analyst David Maris said Valeant’s business decisions “have put Valeant at significant business and reputational risk,” Reuters reported.
While Valeant has been shedding its market share and has also been under scrutiny by a U.S. congressional committee for the pricing of some of the older drugs it acquired through M&A activity, Schiller has also been flagged for using the company jet on at least three occasions over the past month for ski trips to Colorado, the Southern Investigative Reporting Foundation reported.
Schiller, Valeant’s former chief financial officer, took over as interim CEO following the December hospitalization CEO Michael Pearson for pneumonia. Pearson’s illness and the tapping of Schiller comes at a tough time for Valeant as it seeks to calm investors after an accounting scandal and regain some market share after a difficult few months that saw the stock lose far more than 75 percent of its value. Valeant’s stock is trading at $75.91 per share this morning, but in August it was trading at $262.52 per share.
Valeant has been under attack for the pricing of some of its drugs, as well as its relationship with the specialty pharmacy company Philidor Rx Services that has drawn allegations of falsely inflating revenues, earning the company the moniker of the “pharmaceutical Enron,” by short-selling group Citron Inc. In an October release, Citron Research decried Valeant for its “unsavory business practices of massive price raises on pharmaceuticals acquired in a rapid succession of acquisitions, while slashing research and development.” Additionally, the Citron report criticized Valeant’s relationship with Pennsylvania-based Philidor, a specialty pharmacy acquired by Valeant last year. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company.
Valeant is also facing scrutiny from U.S. lawmakers and two U.S. attorney’s offices over pricing of drugs acquired through acquisitions. Valeant is under fire for a price increase of two recently-acquired cardiac drugs, Nitropress and Isuprel, after the company acquired Salix Pharmaceuticals, Ltd. Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
In addition to the two cardiac drugs, Valeant has also been criticized for quadrupling the price of the 55-year-old drug Cuprimine, used in the treatment of Wilson disease. A New York Times article excoriated Valeant for its practice of increasing the price of drugs following an acquisition. According to a Deutsche Bank report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors.