Valeant Pharmaceuticals (VRX) Down 43%; Raffat Concerned

Valeant Pharmaceuticals is absolutely being crushed. Shares are down 43 percent at the time of this writing and this stock is a big company with many hedge funds involved, so the pain is real (if you are a billionaire). No sell-side updates since our earlier article, but below are some remarks from the conference call which seemed to frighten investors and a full audio clip via S&P Capital IQ.

UPDATE: Umer Raffat who has done some great work on the company is out with comments. He states:

At the end of the day, Valeant’s updated 2016 guidance is $8.50-$9.50. My sense is that mgmt was higher than this, but Board overrided that decision. From my perspective, that’s less relevant. The more important issue is whether the disruption seen in 1Q16 is a permanent shift in business – because ultimately, that’s why I have continued to be constructive on the stock.

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Many of you are asking me for a “floor” value based on SOTP. The “parts” seem to have a different value based on 1Q16 performance as per today. We are working on our math and will be in touch.
10-K and 2Q results will ultimately decide where this company is headed next (both from a stock perspective and strategic perspective).

Michael Pearson – Valeant CEO

We have received several key questions from many of you. So with that, we would address a number of them during the presentation.

First, our approach to pricing. We have already committed to reducing pricing on our branded dermatology and ophthalmology products within the Walgreens portfolio on average 10%. This price reduction is on and will impact and will be taken across all channels, not just Walgreens. Other price increases will be modest and in line with market and payer contracts.

In terms of divestitures, as a public company, we continue to review our assets in order to maximize shareholder value. We have no current plans to divest any major platform. However, we will continue to look at our nonstrategic assets and make appropriate decisions.

The ad hoc committee. The ad hoc committee has provided the following statement: I quote, the ad hoc committee has completed a substantial amount of work related to Philidor and certain accounting and financial reporting matters. The committee and these advisors are working diligently and hope to complete the committee’s work in the near future. End quote. As noted, in light of the ongoing nature of these matters, we will not be providing any further comments on the ad hoc committee at this time.

Finally, we have a subject to several ongoing investigations. These include investigations by the U.S. attorneys office for Massachusetts and the Southern District of New York, the SEC and Congress. We are cooperating in these investigations and have provided and will be providing documents, information and testimony in these various investigations, whether pursuant to subpoenas or otherwise. We are also subject to shareholder litigation in both the United States and Canada, which we intend to defend vigorously. Given the ongoing nature of the investigations and litigation, we do not intend to comment further at this time.

So in summary, our business is not operating on all cylinders, but we and I are committed to gain it back on track. We have a set of terrific products and brands and a loyal set of physicians, patients and customers. Through both revenue enhancement and cost reduction, we are confident that we can and again will be able to begin to deliver the cash flows our shareholders and debt holders are accustomed to.

Valeant Pharmaceuticals Conference Call