Valeant endures year from hell as it prepares to report quarterly results

MONTREAL – Onetime corporate darling Valeant Pharmaceuticals is hoping to put its annus horribilis in the rear-view mirror when it reports its second-quarter results Tuesday.

The Quebec-based drugmaker (TSX:VRX) was the most valuable company in Canada by market capitalization a year ago, but has since seen nearly 90 per cent of its value evaporate and changed CEOs as it struggles to rebuild public and investor trust.

New chairman and chief executive Joseph Papa has reduced Valeant’s 2016 earnings guidance after enduring scrutiny from U.S. government investigations, delayed financial results, an earnings restatement and public grillings over alleged price gouging.

Valeant’s latest quarterly results are expected to be modestly better than the first quarter — but dramatically lower compared to 2015.

Revenues are forecast to drop 10 per cent to US$2.46 billion, according to analysts polled by Thomson Reuters. Adjusted profits are expected to plummet to US$512.44 million or $1.48 per share, from US$897.1 million or $2.56 per share a year ago.

The company is expected to earn US$149.5 million or nine cents per share including one-time items, reversing a US$53-million or 15-cents-per-share loss a year ago.

Papa announced on Monday that he has brought in new faces to top management and expanded the roles of some existing senior executives.

Queen’s University graduate Christina Ackermann was named general counsel while communications expert Scott Hirsch was appointed to replace long-standing spokeswoman Laurie Little.

Valeant’s communications and investor relations had been criticized by major investor Bill Ackman of Pershing Square Capital, who has since joined the company’s board of directors.

“As we develop our strategic plan to create the new Valeant, we are adding top talent to the leadership team, promoting hig-performing leaders from within, and creating new structures and processes to help strengthen operations as we move forward,” Papa said in a news release.

The pharmaceutical company has recently received mixed regulatory news. The U.S. Food and Drug Administration has approved a new drug, another is expected to be approved by the end of the year, but restrictions have been placed on another drug that may limit its commercial potential.

And drops for glaucoma weren’t approved due to manufacturing deficiencies at its facility in Tampa, Fla.

However, Valeant announced on Monday a licensing agreement with Norgine B.V. to develop and commercialize a preparation for cleansing of the colon in preparation of colonoscopy.

Industry analysts remain cautious about Valeant’s prospects, fearing Valeant’s US$30-million debt and the potential for loan covenants to be breached if “fundamentals” don’t improve.

They are waiting for assurances that wrinkles have been worked out in the deal with U.S. pharmacy retailer Walgreens to distribute Valeant’s products following the collapse of Philidor Rx Services. They are also awaiting the sale of non-core assets to pay down debt.

“After once again resetting the bar in the first quarter, we believe this quarter provides an excellent opportunity for management to begin to restore investor confidence and put some of the recent missteps and turmoil in the rear-view mirror,” Neil Maruoka of Canaccord Genuity wrote in a report.


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