Forget the plunging stock price, here’s Valeant’s biggest problem by Laura Lorenzetti @FortuneMagazine October 22, 2015, 12:19 PM EST E-mail Tweet Facebook Linkedin Share icons Valeant Pharmaceuticals’ stock price has plunged 42% over the past week, cleaving away as much as $25.36 billion in market value. That devastating loss shouldn’t be the drug maker’s biggest concern, however. It should be more worried about its debt. The Valeant VRX drama began weeks ago when lawmakers targeted the company as the poster child for bad business in the pharmaceutical industry for drastically raising prices on a series of older drugs that the company acquired. Things got worse last week when federal investigators hit the company with a subpoena demanding more information on how it prices and distributes its drugs. Anther blow came in the form of a research report Wednesday that called Valeant the “pharmaceutical Enron.” However, the most dangerous problem—debt—started brewing long before this saga began. Valeant went on a buying spree over the last several years, buying up companies like Medicis Pharmaceutical for $2.6 billion and Bausch & Lomb for $8.57 billion. To fund these purchases, the company has taken on a massive debt load. It’s debt-to-equity ratio, a measure of a company’s financial leverage, is nearly eight times that of other big pharma companies like Pfizer PFE , Novartis NVS and Merck MRK . While companies routinely issue debt to make purchases and other investments, too much corporate debt can make a company look risky in the eyes of lenders and investors. The company now seems ready to back away from its long-running strategy. CEO J. Michael Pearson said Valeant will “pursue fewer if any transactions that are focused on mispriced products,” instead turning its focus to research and development. The comments were a tacit admission that its “prior business model was unsustainable,” wrote Morgan Stanley analysts led by David Risinger on Tuesday. Valeant’s most actively traded bonds (those due in 2025) plummeted right along with its stock on Wednesday, but there just might be a glimmer of hope, according to Bloomberg’s Tracy Alloway: The good news here is that Valeant does not have any bonds coming due until 2018. The bad news is that it now needs to prove it can shift to a growth-oriented business that can exist without the backing of cheap access to capital. And it must do all this while fighting off politicians, prosecutors, and a new crop of short sellers. No matter how you cut it, Valeant certainly has some work to do.