Valeant Stock Falls on Default Fears, U.S. Rep. Criticizes Company Over Philidor
April 13, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Whatever gains Valeant ’s stock may have made in recent days as the company looks to begin a new post-Philidor Rx Services era, came to a halt Tuesday as shares of the company fell after the company received a notice of default over failure to file its 10-k form.
Valeant’s stock, which was trading at $262.52 per share in August, dropped to a low of $26.98 per share in March. The stock had begun to climb back, hitting $35.51 before falling again on fears of the default. Shares are currently trading at $32.22.
Centerbridge Partners, which holds about $250 million worth of Valeant stock, intended to call a default because of Valeant's delay in filing its annual report, the Wall Street Journal reported. The notice of default was not unexpected, as the company warned of a possibility during a call with investors last month. Valeant said it has until June 11, 60 days from the receipt of the notice, to file its 10-K, which will cure the default in all respects.
“The company is working diligently and is on schedule to file its 10-K on or before April 29, 2016. The notice of default does not result in the acceleration of any of the company's indebtedness,” Valeant said in a statement.
Earlier this month Bill Ackman, a new member of the company’s board of directors and one of the company’s biggest stockholders, said the company’s biggest priority is finalizing its delayed 10-K report. Valeant said a delay in filing its annual report might mean the company would be in peril of defaulting on $30 billion in debt. That delay was prompted after Valeant reported in February that 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, which is part of the reason the company was forced to delay filing its financial reports. Valeant laid the blame on Howard Schiller, the company’s former chief financial officer, who briefly served as interim-CEO while Pearson battled pneumonia. The company said the “improper conduct” of Schiller resulted in the provision of incorrect information to the company and “contributed to the misstatement of results.”
On April 5 following an announcement of an ad hoc committee investigating the company’s ties with specialty pharmacy Philidor Rx and found no additional concerns that would require any further actions. 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. It’s also faced heat over 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.
While the company will have to adjust to worries over its $30 billion debt, Valeant is not done with Congress, it seems. This week U.S. Rep. Elijah Cummings criticized the company for not disclosing further information about its relationship with Philidor.
“Your refusal to cooperate fully with Congress is extremely troubling and reflects a pattern of obstruction that impairs our ability to protect the American people against your company’s exorbitant price increases," Cummings said in a letter to Valeant’s outgoing CEO Michael Pearson, Reuters reported.