Valeant Pharmaceuticals International Inc under investigation by U.S. SEC

Valeant Pharmaceuticals International Inc. is under investigation through the U.S. Filing in a previously undisclosed probe, the organization said on Monday, capping a tumultuous 24-hour period that saw the firm announce the return of its CEO and also the cancellation of an earnings announcement.

The SEC probe is outside of an existing investigation right into a company purchased by Valeant this past year, Salix Pharmaceuticals Ltd., said a person acquainted with the matter. The person declined to discuss the record since the matter isn’t yet public.

It’s unclear what the new probe is centered around.

“Valeant confirms that it has several ongoing investigations, including investigations through the U.S. Attorney’s Offices for Massachusetts and the Southern District of recent York, the SEC, and Congress,” said Laurie Little, a Valeant spokeswoman.

Judy Burns, an SEC spokeswoman, declined to discuss the new probe.

Related

Valeant’s female sex drive pill – it bought for US$1B – offers ‘marginal’ libido benefits: studyMore than $6 billion has been cancelled Valeant Pharmaceuticals International Inc shares since ThursdayValeant shares sink as CEO returns from medical leave and company withdraws guidance, delays results

At the time from the mid-afternoon revelation, shares were already down by more than ten per cent after company postponed its pre-market earnings report and withdrew its 2016 guidance following the announcement on Sunday that leader Michael Pearson would be retaking the helm.

Pearson is viewed as integral towards the drug maker’s strategy and execution, and his return following a two-month leave of absence because of severe pneumonia had generally been seen as an positive development.

It also suggested the board is confident in Valeant’s capability to move past recent controversies, such as inadequate financial controls, questions about its broader strategy, and allegations it inflated revenues although the mail order pharmacy Philidor Rx Services.

But the postponement sparked concern among already nervous investors.

“We happen to be worried about the feasibility from the guidance range for many time-” said Irina Koffler, an analyst at Mizuho Securities USA. “We think investors should just delete all comments from recent investor meetings and calls and brace themselves to have an entirely new story.”



Valeant shares fell further in afternoon trading around the TSX, ultimately closing down $15.34, or almost 14 percent, at $94.49.

The stock is down more than 35 percent since Pearson stepped from the company at the end of December. It has lost more than 65 percent of its value previously six months, after briefly becoming Canada’s most valuable company.

Valeant suggested it chose to withdraw guidance and delay its results because Pearson continues to be unable to review and sign off prior to their release.

“I realize that recent events are disappointing to everyone which is my responsibility to create the appropriate tone for that organization,” Pearson said in a statement.

Even prior to the SEC revelation, analysts were cautious around the firm’s outlook.

Douglas Miehm at RBC Capital Markets believes an investment community will be pleased to see Pearson’s return before audited answers are presented and also the random committee completes its overview of Valeant’s financial reporting and internal controls.

“Having said this, we have seen the overall approach to rescheduling Q4 and withdrawing guidance after reiterating it in January as likely to carry excess fat until Mr. Pearson has been able to get in touch with the Street and supply some clarity,’ Miehm said inside a research note.

As a result, the analyst expects Valeant shares is going to be weak until there is certainty about its Q4 release, committee report, and 10-k filing.

TD Securities downgraded Valeant to hold from buy to reflect the lower visibility going forward.

“We believe that the recent developments have the possibility to exacerbate what has already been a protracted decline in investor confidence,” analyst Lennox Gibbs told clients, cutting his price target around the stock to US$110 from US$155.

Although management didn’t disclose the actual drivers behind the decision to withdraw guidance, Gibbs suggested Philidor accounting, the transition to a new fulfilment program with Walgreens and on-going Federal investigations could all be responsible.

Moody’s Investors Service on Monday placed its ratings on Valeant’s debt under review for any downgrade. It cited concerns the company’s performance is weaker than previously expected, which may impede its deleveraging plans.

“Valeant is confronting significant scrutiny on its pricing practices, including those found on products acquired through acquisitions, and uncertainty related to government investigations,” Moody’s said.

Valeant also said it will split up the chief executive and chairman roles, with board member Robert Ingram overtaking the second position from Pearson – an incremental step to improving corporate governance.

“Our hope is that the Ad Hoc Committee will be able to conclude its efforts soon in relation to financial reporting and internal control matters, so we can all focus on building the best company we are able to,” Ingram said inside a statement.

Valeant’s former chief financial officer, Howard Schiller, who served as interim chief executive in Pearson’s absence, will transition from that role but remain on the board.

Financial Post and Bloomberg News