Valeant Pharmaceuticals International, Inc. (VRX) Plunges on Lower Guidance
Shares of Laval, Canada, based Valeant Pharmaceuticals International, Inc. (VRX) got pummeled on Tuesday, against the backrop of a mixed day in stocks overall. Valeant's stock was down 51.46%, losing $35.53 per share, to close at $33.51, on volume of 138,949,843 shares. The company cut its guidance for the fourth quarter of 2015, the first quarter of 2016, and for all of 2016.
Founded in 1994, Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops manufactures and markets a wide range of pharmaceutical products, mostly dermatology, eye health, neurology, and branded generics.
On Tuesday, the company announced preliminary unaudited financial information for the fourth quarter, ended December 31, 2015. Unaudited revenue is projected at just under $2.8 billion, while earnings are projected to come in at $-336.0 million. Unaudited GAAP earnings per share are expected to come in at $-0.98, and adjusted earnings per share (non-GAAP) are expected at $2.50. Fourth quarter sales were negatively impacted by "softer-than-expected" sales of the gastrointestinal business than were expected in the December guidance, driven by reductions in sales in reaction to Valeant's announcement of an agreement with Walgreens.
For the first quarter of 2016, guidance on revenue has been revised downward, from the $2.8 - $3.1 billion announced in December, to $2.3 - $2.4 billion. Adjusted earnings per share (non-GAAP) has been revised downward, from $2.35 - $2.55 to $1.30 - $1.55.
Projections for all of 2016 were also revised downward. Total revenue for the year, initially projected at $12.5 - $12.7 billion, has been revised downward to $11.0 - $11.2 billion. Adjusted earnings per share, initially projected at $13.25 - $13.75, have been revised downard to $9.50 - $10.50.
Tuesday's market reaction resulted in a one-day loss of market value totalling $12 billion, and dropped the stock price to its lowest level in more than five years. The company's stock traded as high as $262 last August. Pershing Square Capital Management, LP, lead by activist investor William Ackman, said that his company would take a "much more proactive role at the company (Valeant) to protect and maximize the value of our investment". Pershing Square Capital Management owns a significant amount of Valeant stock.
"In discussion with the Board, we have assumed lower growth in our U.S. dermatology, gastrointestinal, and woman's health portfolios, as well as certain geographies like Western Europe, while keeping our expenses largely unchanged," said Valeant chief executive officer, J. Michael Pearson. "We plan to work hard to improve these metrics by delivering higher revenues and reducing our costs and, if successful, we hope to beat this guidance in the quarters to come. In the meantime, we are comfortable with our current liquidity position and cash flow generation for the rest of the year, and remain well positioned to meet our obligations."
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