Valeant Pharmaceuticals (VRX): What Will Go Wrong Next?

Valeant Pharmaceuticals Intl Inc (NYSE: VRX)

Valeant Pharmaceuticals was once an incredibly strong stock. In fact, just two months ago, the stock was trading at $250 per share. That’s kind of hard to believe when you look at it now. After steep declines, VRX closed the last trading session at just over $118 per share. Unfortunately, it’s as if the company is in the middle of a boxing ring with Mike Tyson on one side and Muhammad Ali on the other; it simply can’t dodge the punches fast enough! OK, aside from my old boxing comparisons, VRX is in some big trouble right now and I shudder to think what would happen if the company took another hit! Today, we’ll talk about the heavy blows the company has taken over the past week including federal investigations, earnings that weren’t taken well, and claims that VRX is the pharmaceutical equivalent of Enron! I’ll also let you in on what I think we’re likely to see from the stock moving forward.

Wednesday, October 14th – VRX Announces Federal Investigation

Late on Wednesday, October 14th, Valeant Pharmaceuticals announced that it was in the center of a federal investigation. According to the announcement, the pharmaceutical giant received subpoenas from the United States Attorney’s Office in the Southern District of New York as well as the United States Attorney’s Office in Massachusetts. The investigation is looking into pricing practices used by the company after a string of political jabs have been taken at the pharmaceutical industry as a whole. According to the announcement, investigators are looking for more information with regard to pricing information provided to the Centers for Medicare and Medicaid Services, how the company distributes its products, and the financial aid VRX has provided to patients with financial hardships. The investigation is looking more specifically at two of the companies flagship products, Isuprel and Nitropress. During the announcement, the CEO at VRX, J. Michael Pearson, informed investors that he believes that VRX has done nothing wrong and that the company has plans to cooperate with investigators.

Monday, October 19th – Valeant Pharmaceuticals Reports Earnings

On Monday, VRX reported their earnings for the most recent quarter. When it comes to earnings and revenue, the company did relatively well. In terms of earnings per share, analysts were expecting to see $2.68 reported. However, the company actually reported $2.70 per share, a positive earnings surprise. While there was positive news in the earnings report, comments made by the company’s CEO about a change in strategy concerned investors. According to Pearson, VRX is planning on spending more money on research and development or potential spin off entities. This strategy is definitely a new take compared to the company’s history of buying smaller competitors and increasing the prices of their drugs. Unfortunately for Valeant Pharmaceuticals, investors simply weren’t impressed with the new plans.

Wednesday, October 21st – VRX Is Named The Enron Of Pharmaceuticals By Citron

The most recent hit to the company’s ability to grow came yesterday as Citron made claims that Valeant Pharmaceuticals was much like Enron. In a statement, Citron made the allegation that Valeant Pharmaceuticals was improperly benefiting from a relationship with a pharmacy known as Philidor, a pharmacy that has only one client… you guessed it, VRX! According to Citron, VRX filed fake invoices with Philidor as the recipient in an attempt to make revenue seem as though it was higher than it actually was. In response, VRX stated that the relationship it has with Philidor is legitimate and that they do not clock revenue until the end product is sold by Philidor. To read the full response, click here.

What We Can Expect To See Moving Forward

Unfortunately, things aren’t looking great for VRX at the moment; the company is going to have to find a way to stop the bleeding and show investors that it is still the great pharmaceutical giant that it once was. Until then, we’re likely to see more overwhelmingly negative news out of this stock. In fact, the market just opened 9 minutes ago and VRX is already headed down; it will likely fall below $100 per share before mid day today. I will keep you posted as more news becomes available.

What Do You Think?

Where do you think VRX is headed and why? Let us know in the comments below!

[Image Courtesy of CTV News]

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