Valeant Plunges on Report of Potential Earnings Restatement Valeant Plunges on Report of Potential Earnings Restatement
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- Stock down 9% after close, fell 11% in regular trading
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Valeant Pharmaceuticals International Inc. plunged in late trading Monday after a report that the company may restate earnings.
The shares fell 8 percent to $69.87 at 5:15 p.m. in New York, after declining 11 percent in regular trading on Monday.
The restatement is expected after an internal review of operations by the company’s board, the Wall Street Journal said, citing people familiar with the matter. The board committee was formed last year to investigate the drugmaker’s relationship with mail-order pharmacy Philidor Rx Services LLC.
The restatement concerns sales made through Philidor, the Journal said, and deals with sales from 2014 and 2015. The decision on a restatement hasn’t been finalized, the Journal said.
A Valeant spokeswoman was not immediately available to comment.
Valeant faced questions over its relationship with Philidor last year, including accusations of accounting fraud from short-seller Citron Research. The drugmaker eventually revealed that it had paid $100 million for an option to buy Philidor for nothing at any time during the next 10 years, and consolidated Philidor’s financial results into its own. Valeant denied any wrongdoing with its accounting, though it
set up the committee on Oct. 26 to review the Philidor relationship. The committee has been run by lead independent director Robert Ingram, and includes directors Mason Morfit, president of ValueAct Capital, Norma Provencio, head of the board’s audit committee, and Colleen Goggins, a former Johnson & Johnson executive. Mail-Order Pharmacies
The use of mail-order and specialty pharmacies is common in the drug industry, where the pharmacies handle complex drugs, aid drugmakers with obtaining reimbursement from insurers, and ship products directly to patients, cutting out distributors. Yet there were particular aspects of Philidor that raised eyebrows.
In October, it was reported that Philidor engaged in various tactics to boost reimbursements for Valeant from health insurers, including
submitting claims under different pharmacy identification numbers and
altering the codes on some doctors’ orders so it would appear that physicians or patients wanted Valeant’s brand-name drugs instead of generics. Philidor said that it only filled prescriptions with medications that doctors and patients requested. Philidor Relationship
Valeant said on Oct. 30 it would
end its relationship with Philidor, and the pharmacy announced it was shutting down. From the first report by Citron on Oct. 2, to Valeant’s cutting ties at the end of that month, Valeant’s stock fell by about half. Valeant
predicted in December that dealing with fallout from the Philidor relationship would trim about $500 million from the company’s fourth-quarter and 2016 earnings before interest, taxes, depreciation and amortization, thanks to disruption to its distribution chain, lower prices for drugs, retention bonuses to keep workers, legal fees and a new patient access program.