Valeant slashes guidance yet again as Q1 earnings take a beating

Another Valeant earnings call, another guidance-slashing. Once again, the take-down was hefty--and investors responded accordingly, despite reassurances from the company’s new CEO that the embattled drugmaker has “a solid future ahead.”

Tuesday, the Canadian company lowered earnings guidance for the year to between $6.60 and $7 per share, down from its previously guided $8.50 to $9.50. It now expects revenue to hit in the $9.9 billion to $10.1 billion range, versus the range of $11 billion to $11.2 billion it predicted in back in March.

Shares, which have taken a beating over the past 10 months on political pricing pushback, channel-stuffing allegations, debt-default worries and significant guidance-lowering, headed downward once again, plunging 21% in early trading.

Valeant--which will look to exceed those forecasts under the guidance of new skipper Joseph Papa--attributed the guidance alteration to underperformance in a couple key areas. In particular, it shaved $410 million off its predictions for its dermatology business, which has struggled to rebound since the company severed ties with controversial specialty pharmacy Philidor and posted a 43% year-over-year loss in Q1. Valeant last year set up a distribution deal with Walgreens to fill the Philidor void, but that program is facing “speed bumps,” Papa said--including an average selling price that is, in some places, negative.

“Every time a prescription goes out the door, we’re taping dollar bills to that prescription,” Papa said on a conference call with shareholders. And while he promised that both Valeant and Walgreens were “very committed” to fixing that problem and that its resolution would generate “significant upside,” he declined to give a timeline for when that would happen.

But dermatology isn’t the only area for which Valeant adjusted expectations. GI med Xifaxan, picked up in Valeant’s acquisition of North Carolina’s Salix, has suffered in the face of sales force turnover, shifts in strategy, changes in leadership and an increase in enrollment in high-deductible healthcare plans, Valeant said--so it’s knocking $390 million off its predictions for that product, too. About $300 million will come off its expectations for other products--including jacked-up Isuprel and Nitropress, the subjects of intense Congressional scrutiny for which Valeant recently agreed to provide rebates.

Meanwhile, the Quebec-based drugmaker put up a loss of $373.7 million for the quarter, compared with the $97.7 million in profit it took in during the same period last year. Revenues grew 9% to $2.4 billion, thanks in large part to acquisitions.

Papa, though, outlined plans to stabilize the company, a step he says is necessary before Valeant makes a turnaround and, later, a transformation. Those plans include driving engagement--which the company will do adding outside talent and investing in relationships with patients, prescribers, payers and investors; reallocating its resources to patch up the dermatology business and give Salix a boost; and executing on Valeant’s other priorities, such as paying down debt, selling off non-core assets, cooperating with ongoing government investigations and fixing its pricing and access issues.

“I know it’s been a difficult 9 months for the team, but I know we also have dedicated leaders that know what is right and necessary” to turn the company around, Papa told investors.

- read Valeant's release

- see its earnings presentation (PDF)

Special Report: The most influential people in biopharma today - 2016 - J. Michael Pearson - Valeant

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