New records shed light on Valeant's operations
Shares of Valeant Pharmaceuticals International (VRX) sank again Monday, as newly released records shed light on the embattled drugmaker's operations and the company said it would file its quarterly financial report by June 10.
The Canada-based company's stock closed down 6.0% at $28.09. The shares have lost roughly 89.3% of their value since early August amid criticism and investigations of Valeant's drug-pricing and distribution policies.
Documents released Friday by the Senate Special Committee on Aging show that billionaire hedge fund manager Bill Ackman, whose Pershing Square Capital Management is among Valeant's largest investors, feared the worst last fall when a report questioned the drugmaker's ties with specialty pharmacy Philidor Rx Services.
The report by short-seller Andrew Left's Citron Research contended that Valeant partnered with the Pennsylvania-based company to create "a network of phantom pharmacies" that would steer pharmacy benefit managers to the company's more expensive medications. Valeant share prices sank following the allegations.
"I don't think you are handling this correctly and the company is at risk of getting into a death spiral as a result," Ackman wrote in an Oct. 27 email to then-Valeant CEO J. Michael Pearson about the company's response to the report.
A second Oct. 27 message Ackman sent to Pearson and other company officials added that "time is running out."
"You have previously made the mistake of waiting while Rome was burning. There is now a conflagration. It takes no
time to prepare for a conference call to tell the truth. The time to do it is today," wrote Ackman. "We are on the brink of a tragedy. Please do the right thing. I am reachable on cell if you have any further questions."
Valeant ultimately denied the allegations, and then cut ties with Philidor, appointed a special board committee to examine the relationship between the companies and delayed filing of the drugmaker's 2015 annual report pending the review.
The committee's findings prompted restatement of $58 million in Valeant's 2014 fiscal year revenue, reduced that year's net income by $33 million and cut earnings per share by 9 cents a share, the company's annual report confirmed when it was belatedly filed last month.
The annual report also said Valeant had identified misstatements for the first quarter or 2015 that reduced revenue by roughly $21 million, increased net income by approximately $24 million and boosted diluted earnings per share by 7 cents.
In a string of public disclosures since October, Valeant has confirmed that it is under investigation by both the Senate committee and a House panel, federal prosecutors in Massachusetts and New York, the Securities and Exchange Commission, a Québec financial regulator and authorities or regulators in several U.S. states.
The company last month in recent weeks announced corporate housecleaning plans, including the hiring of health care industry veteran Joseph Papa to succeed Pearson as CEO and chairman, and an overhaul of the drugmaker's board of directors. However, the trajectory of Valeant's shares has continued down, even as Valeant's belated filing of the annual report eased concerns the company could face technical default on portions of its $30 billion debt.
On Monday, Valeant said it would file its quarterly report for the first three months of the year by June 10, "well in advance" of the July 31 deadline in the company's amended credit agreement.
The drugmaker also reaffirmed its previous financial guidance for 2016 revenue and earnings per share.
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc