Reuters
The stock is down around 9% in Monday's trading, after the company announced it would delay a fourth quarter earnings announcement expected Monday morning.
CNBC also reported that it would have a call with Wall Street analysts Monday afternoon, but the company then quickly canceled the call. People were confused.
Now here's more bad news - Moody's ratings agency is putting a bunch of Valeant debt under review for a downgrade.
Here's the part you have to read [emphasis ours]:
Valeant's Ba3 Corporate Family Rating (under review for downgrade) reflects its good scale in the global pharmaceutical industry with annual revenue above $10 billion, its strong diversity, its high profit margins, and its good cash flow. The ratings are supported by low exposure to patent cliffs, and growth from successful products like Jublia (antifungal) and Xifaxan for irritable bowel syndrome. In addition, the ratings are supported by management's commitment to reduce debt/EBITDA, using excess cash flow for debt repayment.
However, the ratings also reflect moderately high financial leverage (pro forma gross debt/EBITDA of 5.5x), and significant business challenges related to Valeant's pricing strategy and aggressive acquisition appetite. Valeant is confronting significant scrutiny on its pricing practices, including those on products acquired through acquisitions, and uncertainty related to government investigations. In late 2015,Valeant announced it was terminating its relationship with specialty pharmacy distributor Philidor, and Valeant is transitioning to a new distribution arrangement with Walgreens.
Valeant, a former Wall Street darling, was forced to change its business model last year after coming under scrutiny for its pricing practices, and for its strange relationship with a secret pharmacy called Philidor.
Basically, Valeant promised not to hike the prices anymore, and dismantled Philidor before creating a new agreement with Walgreens. While it was doing that, Valeant also promised to cut down on its debt load - of around $30 billion - in 2016, forgoing more acquisitions.
What's interesting about Moody's statement, is that it mentions Jublia and Xifaxan, two of the company's top selling drugs. Both those drugs are at risk right now. CVS has said that it is going to make customers try a generic form of Jublia (a toe fungus drug) before they can buy the Jublia itself. Xifaxan may be about to see a generic rival enter the market.
Check out the full release from Moody's below:
Moody's reviews Valeant's ratings for downgrade
29 Feb 2016
Approximately $31 billion of rated debt affected
New York, February 29, 2016 -- Moody's Investors Service placed the ratings of Valeant Pharmaceuticals International, Inc. ("Valeant") and subsidiaries, including the Ba3 Corporate Family Rating under review for downgrade. This rating action reflects concerns that Valeant'sunderlying operating performance is weaker than Moody's previous expectations, potentially impeding the company's deleveraging plans.
Moody's review will focus on the opportunities and challenges in Valeant's key businesses as well as the progress at transitioning toward a new prescription fulfillment program with Walgreens. In its review, Moody's will also consider Valeant's deleveraging prospects, as well as the company's ability to deliver sustainable growth in a strategy less reliant on large acquisitions and cost reductions.
Ratings placed under review for downgrade:
Valeant Pharmaceuticals International, Inc.:
Corporate Family Rating at Ba3
Probability of Default Rating at Ba3-PD
Senior secured bank credit facilities at Ba1 (LGD 2)
Senior unsecured notes at B1 (LGD 5)
Valeant Pharmaceuticals International:
Senior unsecured notes at B1 (LGD 5)
VRX Escrow Corp. (obligations assumed by Valeant Pharmaceuticals International, Inc.):
Senior unsecured notes at B1 (LGD 5)
Rating affirmed:
Valeant Pharmaceuticals International, Inc.:
Speculative Grade Liquidity Rating at SGL-2
The affirmation of the SGL-2 Speculative Grade Liquidity rating reflects Valeant's good liquidity stemming from low debt maturities relative to cash flow and revolver size, and the expectation that Valeant will remain in compliance with its financial maintenance covenants.
RATINGS RATIONALE
Valeant's Ba3 Corporate Family Rating (under review for downgrade) reflects its good scale in the global pharmaceutical industry with annual revenue above $10 billion, its strong diversity, its high profit margins, and its good cash flow. The ratings are supported by low exposure to patent cliffs, and growth from successful products like Jublia (antifungal) and Xifaxan for irritable bowel syndrome. In addition, the ratings are supported by management's commitment to reduce debt/EBITDA, using excess cash flow for debt repayment.
However, the ratings also reflect moderately high financial leverage (pro forma gross debt/EBITDA of 5.5x), and significant business challenges related to Valeant's pricing strategy and aggressive acquisition appetite. Valeant is confronting significant scrutiny on its pricing practices, including those on products acquired through acquisitions, and uncertainty related to government investigations. In late 2015,Valeant announced it was terminating its relationship with specialty pharmacy distributor Philidor, and Valeant is transitioning to a new distribution arrangement with Walgreens.
Headquartered in Laval, Quebec, Valeant Pharmaceuticals International, Inc. ("Valeant") is a global specialty pharmaceutical company with expertise including branded dermatology, gastrointestinal disorders, eye health, neurology, branded generics and OTC products. Valeantreported approximately $10 billion in total revenue for the 12 months ended September 30, 2015.
The principal methodology used in these ratings was Global Pharmaceutical Industry published in December 2012. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.