Tuesday, March 15, 2016 8:41 pm
(Reuters) Valeant Pharmaceuticals International Inc’s (VRX.TO) shares plunged 50 percent on Tuesday after the company said a delay in filing its annual report put it in danger of a default on its $30 billion in debt.
The news from the Canadian drugmaker, which also slashed its 2016 sales and earnings outlook, prompted Bill Ackman, whose Pershing Square Capital Management is one of Valeant’s largest shareholders, to tell investors that he would take a much more active role there.
For years, Valeant was an investor darling, buying up assets and delivering double-digit profit growth. It bought companies and raised prices on their drugs, a strategy that has collapsed under scrutiny of high drug spending.
At the same time, its unusual financial relationship with a pharmacy selling most of its highly profitable dermatology drugs began to fall apart in the fall of 2015, and its shares slid.
During a more than two-hour conference call on Tuesday, Wall Street analysts pressed Chief Executive Officer Michael Pearson for answers. One asked how management can be trusted, given its earlier positive outlooks, and another questioned whether Pearson has the support to lead the company.
“It starts with me,” Pearson said. “We have to meet or exceed this guidance, and I think we all recognize that. It’s a bit of a starting-over point.”
Valeant’s stock, which was at a high of $263.70 in August, was down 50 percent at $34.54 in New York trading, its biggest decline ever.
The value of stakes held by Pershing Square and ValueAct, another large investor, lost about $700 million on Tuesday. Investment firm Ruane, Cunniff & Goldfarb, its largest holder, lost $1.6 billion and T. Rowe Price (TROW.O) lost $1 billion, according to a Reuters review of investor regulatory filings.
The company, which has incurred a heavy debt load because of a string of acquisitions, is now looking to sell some non-core assets, Pearson said, without being specific.
“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.
The company, the target of U.S. investigations into its business and accounting practices, 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.