The shares of Valeant Pharmaceuticals International Inc plunged after the company said a delay in filing its annual report could mean a debt default as the company announced a cut in its 2016 revenue forecast by about 12 percent.
Without being specific, Chief Executive Officer Michael Pearson said that Valeant, which has incurred a heavy debt load because of a string of acquisitions, is now looking to sell some non-core assets.
The Canadian drugmaker reiterated that it would put off filing its annual report with U.S. regulators but for the first time raised the specter of a default. The company has been at the target of U.S. investigations into its business and accounting practices.
Failure to file the report by Tuesday's deadline would put it in breach of a covenant in credit agreements and that holders of at least 25 percent of any series of notes may deliver a notice of default said Valeant whose U.S.-listed shares fell 40 percent in early trading.
Restrictions on Valeant's ability to borrow further could be placed by a default and could prompt lenders to demand faster repayment. The best estimate for filing the annual report was April, Pearson said.
There is about $30 billion of long-term debt with the company as of September 30. Coming down from an earlier forecast of $2.25 billion, the company said it would repay at least $1.7 billion this year.
He was "comfortable" with the company's liquidity and expected Valeant to meet its obligations, Pearson said.
"Our business is not operating on all cylinders, but we are committed to getting it back on track," said Pearson, who returned last month from a medical leave of absence.
While a board committee looked into its accounting practices, the company said last month it would delay filing its annual report. It also said it would restate 2014 and 2015 financial statements.
Last year allegations emerged that Valeant was using distributor Philidor RX Services to inflate dermatology revenue ad that is when troubles started to mount on the company as questions were raised about its drug pricing.
Ties with Philidor, which has gone out of business, have been cut by Laval, Quebec-based Valeant.
The company is also the subject of U.S. state investigations for steep price hikes on some drugs.
Pearson said future price increases would be more modest. He added that Valeant had become a tough place to work due to the company's troubles.
Compared with its previous outlook of $12.5 billion to $12.7 billion, Valeant on Tuesday forecast 2016 revenue of $11 billion to $11.2 billion.
Slower growth in the U.S. dermatology, gastrointestinal and women's health businesses was reflected in the $1.5 billion cut.
"We believe investors are best off not owning the shares as Valeant tries to get its arms around the issues," Wells Fargo analyst David Maris said in a note.
Missing the analysts' average estimate of $2.61, Valeant reported unaudited fourth-quarter earnings of $2.50 per share, excluding special items.
Down from its previous forecast of $13.25 to $13.75, the company said that it expected earnings of $9.50 to $10.50 per share for 2016.
(Source:www.reuters.com)
Without being specific, Chief Executive Officer Michael Pearson said that Valeant, which has incurred a heavy debt load because of a string of acquisitions, is now looking to sell some non-core assets.
The Canadian drugmaker reiterated that it would put off filing its annual report with U.S. regulators but for the first time raised the specter of a default. The company has been at the target of U.S. investigations into its business and accounting practices.
Failure to file the report by Tuesday's deadline would put it in breach of a covenant in credit agreements and that holders of at least 25 percent of any series of notes may deliver a notice of default said Valeant whose U.S.-listed shares fell 40 percent in early trading.
Restrictions on Valeant's ability to borrow further could be placed by a default and could prompt lenders to demand faster repayment. The best estimate for filing the annual report was April, Pearson said.
There is about $30 billion of long-term debt with the company as of September 30. Coming down from an earlier forecast of $2.25 billion, the company said it would repay at least $1.7 billion this year.
He was "comfortable" with the company's liquidity and expected Valeant to meet its obligations, Pearson said.
"Our business is not operating on all cylinders, but we are committed to getting it back on track," said Pearson, who returned last month from a medical leave of absence.
While a board committee looked into its accounting practices, the company said last month it would delay filing its annual report. It also said it would restate 2014 and 2015 financial statements.
Last year allegations emerged that Valeant was using distributor Philidor RX Services to inflate dermatology revenue ad that is when troubles started to mount on the company as questions were raised about its drug pricing.
Ties with Philidor, which has gone out of business, have been cut by Laval, Quebec-based Valeant.
The company is also the subject of U.S. state investigations for steep price hikes on some drugs.
Pearson said future price increases would be more modest. He added that Valeant had become a tough place to work due to the company's troubles.
Compared with its previous outlook of $12.5 billion to $12.7 billion, Valeant on Tuesday forecast 2016 revenue of $11 billion to $11.2 billion.
Slower growth in the U.S. dermatology, gastrointestinal and women's health businesses was reflected in the $1.5 billion cut.
"We believe investors are best off not owning the shares as Valeant tries to get its arms around the issues," Wells Fargo analyst David Maris said in a note.
Missing the analysts' average estimate of $2.61, Valeant reported unaudited fourth-quarter earnings of $2.50 per share, excluding special items.
Down from its previous forecast of $13.25 to $13.75, the company said that it expected earnings of $9.50 to $10.50 per share for 2016.
(Source:www.reuters.com)