Valeant says it’s making progress halfway through planned turnaround
CEO warns transforming the embattled company is a multi-year process involving incremental steps.
MONTREAL — Nearly halfway through its planned turnaround, Valeant Pharmaceuticals International Inc. says it is making progress in reducing debt, growing core revenues and resolving legacy legal matters.
“While there is more work to do to complete this turnaround to be clear, Valeant today is a stronger company than it was a year ago,” said chairman and CEO Joseph Papa, who joined the company 18 months ago.
Valeant’s shares surged more than 17% after the drugmaker reported a US$1.3-billion profit boosted by a tax gain.
Valeant’s shares gained C$2.66 to close at C$18.09 in Tuesday trading.
Papa warned that transforming the embattled company is a multi-year process involving incremental steps.
One of the biggest tasks has been cutting its total debt by 11 per cent to $27.4 billion.
The company said it has reduced its total debt by $6 billion since the end of the first quarter of 2016, topping its commitment to pay down $5 billion by February.
Valeant added it no longer feels compelled to sell more assets but will entertain interest in non-core assets, chief financial officer Paul Herendeen said during a conference call addressing third-quarter results.
“It is more opportunistic than I would say a year ago when it was pretty much mandatory that we pursue the divestiture of a number of assets,” he said.
Herendeen also said he’s watching very closely efforts in the US Congress to cut corporate taxes. The largest negative impact for the Canadian-based company is likely to come from a proposed 20 per cent excise tax on payments made by U.S. entities to related foreign companies.
“If this is enacted just that way this is going to be a problem not just for us, but for any multinational companies – US or otherwise _ that do business in the U.S. and have manufacturing and intellectual property located outside the U.S.”
The company said it has resolved 21 legal cases launched against it in the past.
This includes the Justice Department declining to prosecute following a 2015 investigation of payments made between its Bausch & Lomb division and medical professionals involving surgical products.
A class action lawsuit against the eye-care division over consumer fraud allegations was dismissed, as was a royalty dispute over payments for diabetes pill Glumetza.
Valeant still faces a string of lawsuits, including one from its former chief executive, and U.S. investigations over its drug pricing practices after questions about the company’s business model first emerged two years ago.
The scrutiny caused its shares to plunge from more than $300 per share.
The Quebec-based company, which reports in US dollars, said it earned $1.3 billion or $3.69 per diluted share for the three months ending Sept. 30. That compared with a loss of $1.22 billion or $3.49 per diluted share a year ago.
Revenue totalled $2.22 billion for the quarter, down from $2.48 billion in the third quarter of 2016, due in part to the sale of several assets in a bid to reduce its massive debt.
On an adjusted basis, Valeant said it earned $367 million in its latest quarter.
Revenues and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) beat expectations, which Douglas Miehm of RBC Capital Markets said is “positive.”
Valeant lowered its full-year revenue guidance to between $8.65 billion and $8.8 billion. That’s down from $8.7 billion to $8.9 billion in August and $8.9 billion and $9.1 billion in May.
The forecast for adjusted EBITDA was maintained at $3.5 billion to $3.75 billion.