Valeant Stock Plummets on Forecast and Debt Warning

Shares of Valeant Pharmaceuticals International plummeted on Tuesday morning in the worst day for stock in the history of the company.

Shares dropped up to 46% after the business cuts its forecast for 2016, reported a fourth quarter that was weak and said there was a risk it might breach some of its debt obligations if it does not file its annual report at the time it is required to.

During a call of two-hours with analysts, CEO Mike Pearson received questions about why he was the correct person to run the drug maker.

In addition, during the call, the company had to correct a press release that had been issued only hours earlier that said one measure of its earnings would be lower than it was stated.

Shares were 44% lower as of 12:05 p.m. in New York, after dropping 46% to their lowest intraday price in 4 ½ years and the biggest intraday drop ever. Valeant stock has dropped over 85% since it peaked in August of 2015.

Valeant, based in Laval, Quebec could violate its debt agreements, which would put it at the mercy of creditors, since it would be late in filling an annual report.

The pharmaceutical company said it must file a 10-K before March 30 in order to avoid cross defaults from triggering that would keep it from being able to tap into its credit line any further.

If it does not meet that deadline, it must start asking its lenders next week to make changes to the credit agreements thereby waiving a default.

Earlier on Tuesday, Valeant released new forecasts for sales and earnings for 2016, which were lower than December projections, provided by the company and then pulled in January.

Gastrointestinal and Dermatology drugs, which until just recently had been key drivers of growth are coming up short.

Pearson says he is not planning any key asset sales but might divest smaller businesses in 2016 to help pay debt down which ballooned to over $30 billion.

 

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David Glass

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