Valeant Pharmaceuticals International Inc. (VRX) filed its overdue 10-K form with the SEC Friday, restating revenues and profits for 2014 and much of 2015 and, it says in the filing, clearing up the risk of defaulting on its loans.
The controversial drugmaker faced a Friday deadline for turning in its annual report, or its lenders would have forced it into default. The company requested in late March that the deadline be extended to the end of May. The company was initially scheduled to report earnings at the end of February. (See also: Valeant News: Michael Pearson's Return.)
Friday's filing lowers 2014 revenues from the $8.10 billion Valeant initially reported to $8.05 billion, and earnings from $913.5 million ($2.67 per share) to $880.7 million ($2.58 per share). The filing also restates first-quarter 2015 results, lowering revenues to $2.17 billion from the initially reported $2.19 billion, and raising net income to $97.7 million ($0.28 per share) from $73.7 million ($0.21 per share).
Valeant's shares were up over 3% shortly after the open, but have erased their gains. As of 10:10 a.m. EDT, they have fallen 0.1% to $35.15. (See also, 3 Answers for Valeant Investors.)
The company confirmed that it had recognized $58 million in revenue from the specialty pharmacy Philidor Rx Services LLC too early. Valeant came under fire for its accounting practices, particularly as they relate to its relationship with Philidor, beginning in October, when Australian hedge fund manager John Hempton floated the issue in the form of a cryptic Graduate parody:
Me: I just want to say one word to you. Just one word.
Graduate: Yes Sir
Me: Are you listening?
Graduate: Yes, are you?
The stock closed at $168.87 on October 15, the day Hempton posted that warning. They have since fallen 79%.
Subsequent reports uncovered irregularities with Valeant and Philidor's relationship, including Valeant employees' involvement in the pharmacy's operations and allegations that the pharmacy was pushing higher-priced Valeant drugs on patients for whom generics would suffice. The company disclosed that it was being investigated by the SEC in late February. (See also, Who Are Valeant's Main Competitors?)
Bill Ackman, CEO of the hedge fund Pershing Square Management LP, invested heavily in Valeant and took a seat on the company's board in March. Around that time his funds were down approximately 47% from their highs, largely as a result of his bet on Valeant. On April 25 the company replaced its CEO Mike Pearson with former Perrigo Company PLC (PRGO) CEO Joe Papa, who may begin work Monday.
Pearson and Ackman testified before a Senate committee Wednesday regarding the company's strategy of drastically raising drug prices. Valeant raised the prices of Isuprel by 525% and Nitropress by 212% in 2015. Pearson was not able to name a single drug the company had acquired without raising its price.