Valeant files overdue 10-K, makes sweeping board changes in push for turnaround

Valeant  HQ

Attention, Valeant investors: The company’s 10-K is finally here.

Friday, the embattled drugmaker filed its overdue annual report--a move that will likely erase any potential of defaulting on its debt. But that wasn’t all from the Canadian pharma, which also laid out a slate of nominees to replace several departing directors.

With the report--held up after an ad hoc committee uncovered $58 million in accounting missteps related to now-dead specialty pharmacy Philidor--Valeant had been aiming for an April 29 deadline to avoid violating lender agreements, though it had worked out an extension deal with holders of its bank loans. Earlier this month, it had received notices of default on some of its senior notes thanks to the filing delay, but those are now “cured in all respects,” it said.

Valeant’s Friday filing includes restated financial statements from 2014, as well as restated quarterly results from 2014’s Q4, 2015’s Q1, the 6 months ended June 30, 2015 and the 9 months ended September 30, 2014.

The $58 million blunder--which Valeant uncovered after a short-seller in October accused the company of using its Philidor relationship to inflate its top line--cut down 2014 net income by $33 million and EPS by 9 cents, it said. And because of a reversing effect on earnings from the 2014 flub, the company felt the effects in Q1: It pared down revenue by about $21 million, increased net income by about $24 million, and upped EPS by 7 cents. Valeant had originally reported Q1 sales of $2.19 billion, with earnings hitting $74 million, or 21 cents per share.

In the 10-K, Valeant also disclosed that a pair of ongoing probes from the U.S. Attorney's Offices for the District of Massachusetts and the Southern District of New York focus on issues including its patient assistance programs, its dealings with Philidor and other specialty pharmacies, financial support it provided for patients, and discounts and rebates on its products. And it said it’s under an investigation by the State of North Carolina Department of Justice, too, relating to matters including production, marketing, distribution, sales and pricing of Nitropress and Isuprel, two heart drugs on which it dramatically raised prices last summer.

Meanwhile, Valeant is in the middle of implementing sweeping changes--in part driven by new board member and activist investor Bill Ackman--to get things back on track. Monday, new CEO Joseph Papa--poached from Perrigo earlier this week--will step in for the departing J. Michael Pearson, whose price-hike strategies earned him the ire of payers and politicians alike. And Friday, the company announced that fellow director Howard Schiller--a former CFO and interim CEO at Valeant who had already refused one request to step down--as well as 5 others would be following him out.

To replace them, Valeant has submitted Novartis vet Jerry Karabelas, BMO Financial Group anti-money laundering head Russel Robertson and practicing dermatologist Amy Wechsler as potential candidates.

"I am pleased that Valeant is making good progress toward restoring the public's confidence and that the company has hired a great leader with an impressive track record of achievements and an impeccable reputation," Chairman Robert Ingram said in a statement. "We are excited for Valeant's next chapter and believe that the board is well-equipped to oversee a successful turnaround under Joe Papa's leadership."

- read Valeant's releases here and here
- see the company's 10-K

Special Report: The most influential people in biopharma today - J. Michael Pearson - Valeant

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