The company also said that it could soon have a problem with its creditors. The company appears to be in breach of its lending covenants for a missing a deadline to file its full 2015 financial reports.
Valeant had long been a darling of Wall Street. The company’s rapid acquisition strategy appeared to produce lots of growth, and not a lot of need to spend money on R&D, often the biggest expense for a drug market. CEO Michael Pearson became a star. But ever since last summer, the company has had to face allegations of improper accounting, and that it used predatory price hikes to boost growth.
October 22: Valeant calls Left’s report erroneous. The company says it hasn’t used Philidor to book fake sales. It says Philidor is a separate company, but that Philidor’s financials are included on Valeant’s financial statements. Valeant says it has purchased an option to buy the company. Shareholders are unpleased by the lack of disclosure and odd relationship. Valeant’s shares have now plunged 30% in three days. Left calls Valeant’s relationship with Philidor the “turd in the punchbowl.” Valeant says it will hold a conference call to clarify its relationship with Philidor, but says it won’t do it until after the weekend.
October 30: Valeant says it is cutting its ties to Philidor, and that the pharmacy will shut down immediately. Allegations have emerged that Philidor may have changed prescriptions to push Valeant’s high-priced drugs on patients, rather than generics. Ackman holds a four-hour conference call to defend the company. He predicts the stock will more than double. On the call, Ackman refers to a number of instances of fraud in the drug industry and the large settlements that the companies had to pay. He says Valeant is likely to be under legal scrutiny for a while. But the conference call has the opposite affect: Valeant’s shares fall another 16%.
Dec 15, 2015: Valeant inks a deal to distribute its drugs through pharmacy chain Walgreens Boots Alliance.
Dec 16, 2015: The Canadian drugmaker says its Q4 profit was hit when it cut ties with pharmacy Philidor Rx Services, but it could contain the damage in 2016 and grow profit.
March 1, 2016: Bill Ackman, who bought more shares of Valeant in late 2015, goes on CNBC to say that everything will be just at the company. “We expect much of the uncertainty will be resolved in the relative short term, hopefully over the next few or so weeks,” says Ackman.
March 7, 2016: Valeant says it would release preliminary quarterly results and guidance on March 15, two week after it was originally scheduled to be released.
Mar 10, 2016: A U.S. congressional committee urges Valeant to explain why it was withholding documents related to an investigation into steep hikes in prices of two of the company’s heart drugs.
Mar 15, 2016: Valeant cuts 2016 revenue forecast by about 12 percent and says a delay in filing its annual report could mean a debt default, causing its shares to plunge.
March 17, 2016: S&P says it is putting the debt of Bill Ackman’s publicly traded investment vehicle on review because of his Valeant losses. Ackman says the investment vehicle is down 26% in 2016, making it among the worst performing hedge funds of the year. Of the 11 stocks in Ackman’s hedge fund portfolio, only one is up more than 1% in 2016.
March 18, 2016: CEO Pearson sends a memo to his staff reassuring them that the company will not go bankrupt. The price of Valeant’s debt had fallen to 76 cents on the dollar, roughly meaning that investors believed there was a 24% chance the company would not be able to pay back it’s creditors. “I want to apologize directly to each of you for the distractions this intense scrutiny is causing you,” Pearson wrote in the email to Valeant employees. A few days earlier, on its earnings call, Pearson acknowledge that Valeant has become a tough place to work.