Valeant Pharmaceuticals shares tumbled today on the back of a string of bad analyst reports triggered by the company’s disclosure that it is now in the Securities and Exchange Commission’s crosshairs. It also delayed the filing of its 10-K. Additionally, Democratic presidential candidate Hillary Clinton has again vowed to take Valeant down for “predatory pricing” of its drugs.
Shares of Valeant Pharmaceuticals pulled back another 7.46% to $60.88 during regular trading hours today, continuing yesterday’s decline.
Huge downgrade from RBC
RBC Capital analyst Douglas Miehm said in a report dated today that he’s downgrading Valeant Pharmaceuticals from Outperform to Sector Perform and is slashing his price target more than in half from $194 to $85 per share. The drug maker disclosed the SEC probe and several other investigations, including some launched by U.S. Attorney’s Offices in multiple regions. Congress is also targeting it for its drug price increases, the company said.
In connection with the disclosures, Valeant said the SEC subpoenaed it in the fourth quarter and that it had planned to include the SEC probe news in its 10-K disclosures. Miehm thinks the issue could be seen as a minor one because Valeant’s general counsel didn’t see the need to disclose the subpoena at the time of receipt. However, no other details were provided, so he added that visibility into what’s happening at the drug maker is impaired at this time, which is why he downgraded its stock. He expects it to trade at a discount to its peers until the overhangs are resolved.
Other analysts react to Valeant Pharmaceuticals’ disclosures
Deutsche Bank analyst Gregg Gilbert suspended his rating and estimates for Valeant Pharmaceuticals pending more information on the investigations. The company has delayed the filing of its 10-K, and management has suspended their previous guidance for this year.
BMO Capital Markets analyst Alex Arfaei ventured an estimate on the financial fallout the drug maker could face as a result of the various probes, pegging it at between $500 million and $1.25 billion. He added that now Valeant faces an even longer road in regaining investors’ confidence.
Not all analysts are worried
Jefferies analyst David Steinberg remains Buy-rated on the drug maker, although he slashed his price target for the stock from $172 to $106 per share. He sees CEO Mike Pearson’s return from his battle with severe pneumonia as a big positive because Valeant Pharmaceuticals thrived under the “disruptive business model” he employed. However, he adds that there are now more questions than answers because of the news about the investigations.
Rodman & Renshaw analyst Raghuram Selvaraju, Ph.D. also remains Buy-rated and reiterated his $150 per share price target on Valeant, saying that he thinks the selloff triggered by all the bad news is overblown. He expects an updated outlook in the coming days and seems to think the SEC probe is related to the previous distributor relationship the drug maker had with controversial specialty pharmacy Philidor. As a result, he doesn’t expect much to come of that probe.
Hillary Clinton on the attack
As if the troubling disclosures weren’t enough, Hillary Clinton also has a new campaign ad out which specifically mentions Valeant Pharmaceuticals. She states that she’s “going after” the drug maker for “predatory pricing.” The ad also shows Clinton’s appearance at a town hall meeting in Iowa earlier this year in which she read a letter from someone who was an apparent victim of the company’s drug price increases as the price for a migraine medication made by Valeant skyrocketed from $18 per shot in the 1980s to nearly $1,500 per shot now.
According to The Wall Street Journal, a Valeant spokesperson said after the town hall meeting in January that they have to adjust pricing on the name brand version of a drug to keep production “viable,” adding that patients have the option to choose the generic version at a much lower cost. The spokesperson also said that more than 99% of patients who take the drug in question take the generic.
