Valeant Pharmaceuticals (NYSE:VRX)
On Monday March 4, 2016 Valeant Pharmaceuticals fell down 7% in the morning as the company announced that it will have to delay its financial results. This left investors jittery and in panic mode, because they had and still have no clue why earnings are being pushed back so much. One possible reason could be because the company’s CEO, J. Micheal Pearson, was hospitalized for nine weeks due too a pneumonia concern.
The CEO had returned that Monday, but it didn’t seem that investors were too enthusiastic about it. It could be because investors just want to see the numbers, or the financial health of the company after all the problems plaguing the company. Such problems include the Philidor debacle, and SEC investigation into the company. The financial results were supposed to come out Monday, but the company stated that it needed additional time to prepare them.
Trade smarter and make more money with Tradespoon!
Valeant had to clean up its books by dropping Philidor back in the Fall of 2015. A short seller by the name of Andrew Left of Citron Research released a report in which he called the company a “Pharmaceutical Enron”. He first discovered that Philidor was being used by Valeant as a Phantom pharmacy network. It would push doctors and patients to buy drugs specifically from Valeant regardless of the cost. As this news started to come out, Valeant had to go in panic mode. This is why Valeant had to cut ties with Philidor at that time in the fall of 2015. Was Valeant guilty of performing such a terrible act? There is no way to know for sure until an investigation can be concluded, but it doesn’t look good that Valeant has immediately moved to cut ties with Philidor after the Citron Research Report came out.
Valeant dropping 7% is not that bad, but things got quickly worse. This is because the afternoon brought more bad news with the company falling up to 21% by the close. This happened since the company stated that it was under investigation by the SEC. Believe it or not this is the second SEC investigation, in which details have yet to be released. The first investigation is for the Valeant acquisition of Salix Pharmaceuticals, which took place back in March of 2106.
Sounds like Valeant has its plate full after all these problems right? Not really, because it has many other investigations on going as well. The company also announced that it is being investigated by the U.S. Attorney’s Offices of Massachusetts, Southern District of New York, and by Congress itself. All this will put additional added pressure to Valeant’s stock. The closing share price of Valeant was $65.80 per share on Monday. If things don’t turn around soon, the share price could fall further forcing investors to sell.
Onconova Therapeutics (NASDAQ:ONTX)
On Thursday March 3, 2016 Onconova Therapeutics announced that it had received a notice from Baxalta (NYSE:BXLT) that it would terminate the partnership agreement that was made back in 2012. In the initial deal Baxalta made an upfront payment of at least $50 million, but Onconova had the potential to earn another $515 million for European rights. The timing of Baxalta backing out is not good, especially after Baxalta stated that it would help run the company’s trial.
Under the direction of Baxalta, Onconova initiated a 225 patient trial back in December of 2015. This trial, known as the “INSPIRE” trial, recruited patients with high-risk Myelodysplastic Syndrome — MDS. This disease occurs when a patient’s bone marrow is unable to produce enough blood cells in the body. The bad part about it is that there are hardly any treatments for these patients. The only treatment options are blood transfusions or a stimulating agent to help boost blood cell count.
Onconova was disappointed with this news because it believed that Baxalta would help pay for all the clinical costs of the trial. Now, Baxalta will only be responsible for half the costs, and all rights will revert back to Onconova. Baxalta stated that the reason for dropping the deal was that it did not align with the companies strategic priorities. Although another possible reason is that it won’t need to worry about Onconova’s drug rigosertib. That is because Baxalta is expecting to be acquired by Shire (NASDAQ:SHPG) by summer of 2016 in a deal valued at $32 billion.
Don’t waste your time! Click here to find winning trades in minutes!
Although the company had failed its initial trial with rigosertib in patients with low-risk Myelodysplastic Syndrome, there was a subset of high-risk patients that greatly benefited from treatment. Thus the reason why the company chose to advance this drug in the high-risk population. Whether or not the drug will be successful remains to be seen, but the company needs to hit a home-run on this to see shareholder value rise.
[Image Courtesy of Flickr]