Valeant may restate earnings after second look at Philidor

AP News
Posted: Feb 23, 2016 5:24 PM
Valeant may restate earnings after second look at Philidor

TRENTON, N.J. (AP) — Shares of Valeant Pharmaceuticals recovered some of their recent losses on Tuesday, after the beleaguered drug company said it will delay filing its annual report with regulators while it sorts out its former relationship with the drug distributor Philidor.

Meanwhile, the Canadian drugmaker still isn't saying when CEO J. Michael Pearson will return to work. Pearson has been on medical leave since he was hospitalized with severe pneumonia in late December.

Valeant said it expects to lower reported 2014 earnings by about 10 cents per share and raise 2015 earnings by about 9 cents because about $58 million in sales to mail-order pharmacy Philidor were improperly recognized. Valeant said the sales should have been recognized when patients received the products, not when they were delivered to Philidor.

Interim CEO Howard Schiller said in a company statement that the filing delay was "very disappointing but necessary."

"The last few months have been challenging on many levels," said Schiller, who took over in January under a two-month contract to fill in as CEO for Pearson during his medical leave. "We have made mistakes in the past and our focus today is on executing our business plan and rebuilding trust."

In trading Tuesday, Valeant's U.S. shares rose $3.35, or 4.4 percent, to $79.27. They had fallen from $94.65 a week ago and have plunged from an Aug. 6 high of $263.81 after its prices and business practices came under scrutiny.

Moody's Investor's Service said it revised Valeant's outlook on Tuesday to negative from stable, but noted that the amount of revenue misstated "appears relatively minor."

Valeant cut ties with Philidor last fall amid allegations that Philidor created a network of "phantom pharmacies" to steer pharmacy benefit managers toward Valeant's more-expensive drugs over cheaper alternatives.

Valeant, which is based in Laval, Quebec, also has taken heat for price hikes it has made on drugs it acquired. Schiller testified earlier this month before a House committee investigating high drug prices, stating that he froze all of Valeant's price increases when he took over in January. He said his company would aim for more modest price increases in the future.

On Tuesday, Valeant spokeswoman Laurie Little said the company's board of directors hasn't decided what will happen when Schiller's temporary CEO contract ends in two weeks.

The last update on Pearson's health came in a Jan. 25 memo he sent to company employees.

"Some unexpected complications resulted in a longer hospital stay than anticipated. I'm glad to say I'm on the road to recovery," wrote Pearson, Valeant's CEO since February 2008. He added that the timing of his return was uncertain.

Valeant will host a Feb. 29 conference call to discuss its fourth-quarter results and provide a business update.

The company reported last year that its 2014 net income was $913.5 million, or $2.67 per share, on revenue of $8.26 billion. That was a big swing from 2013, when Valeant lost $866 million, or $2.70 per share, mainly due to a large one-time charge. Its revenue in 2013 totaled $5.77 billion.

On Dec. 16, Valeant slashed its expectations for the fourth quarter and all of 2015 and issued a guarded outlook for 2016. It lowered its adjusted 2015 profit expectations to $10.23 to $10.33 per share, from between $11.67 and $11.87, and its fourth-quarter earnings per share forecast to between $2.55 and $2.65, from $4.00 to $4.20. Both updated forecasts were well below what analysts had been expecting.

Valeant attributed the changes to lower sales, after Congressional and media scrutiny forced it to end its distribution arrangement with Philidor for its lucrative dermatology and ophthalmology medicines. That was right after Valeant struck a new distribution deal with Walgreens for those medicines.

For 2016, Valeant said it expected adjusted earnings to range between $13.25 and $13.75 per share, below expectations for $14.20.


AP Business Writer Tom Murphy in Indianapolis contributed to this story.


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