Why is Valeant Pharmaceuticals (VRX) Stock Plummeting Today?

Shares of pharmaceuticals company Valeant fell 51% on Tuesday after the company missed revenue expectations and cut its forward guidance. Track the stock here.

For full-year 2016, Valeant reduced its EPS outlook from $13.25-$13.75 to $9.50-10.50 per share, compared to expectations of $13.24.

For Q1, the company now expects adjusted earnings to range from $1.30 to $1.55 per share on revenues of between $2.3 billion and $2.4 billion, compared to previous guidance of $2.35 to $2.55 of EPS on $2.8 billion to $3.1 billion of revenues.

Valeant reported fourth-quarter sales of $2.8bn, while profit, excluding certain items, was $2.50 a share.

The average estimate of EPS for the current fiscal quarter for Company stands at $2.61 while the EPS for the current year is fixed at $10.27 by 21 analysts. Jefferies Group reiterated a buy rating and set a $106.00 price objective (down previously from $172.00) on shares of Valeant Pharmaceuticals Intl in a research note on Monday, February 29th.

Earlier Tuesday, Valeant gave new sales and earnings forecasts for 2016 that were lower than projections the company provided in December and then pulled last month. Moreover, it announced that it will reduce its prices on new dermatology and ophthalmology products within the Walgreen’s portfolio by an average of 10%.

Fourth-quarter sales were US$2.8 billion.

For Ackman’s Pershing Square entities, which own 30,711,122 Valeant shares, that translates to a paper loss of $1.09 billion.

“Consultants will likely be forced to recommend clients to redeem completely from those funds where Valeant resulted in a significant capital impairment”, Hedgeye managing director Thomas Tobin wrote on Tuesday. Revenue for the quarter was $2.79 billion.

Tuesday’s earnings report is preliminary and Valeant could face default if it fails to file the audited report by the end of the day. “Our business is not now operating on all cylinders, but we are committed to getting it back”, he said.

Shares of Valeant Pharmaceuticals International plummeted on Tuesday morning in the worst day for stock in the history of the company.

If Valeant doesn’t file its 10-K report by April 29, the company said, its bank lenders will be able to accelerate payment under Valeant’s credit agreement-and if it isn’t filed by mid-May, holders of Valeant’s notes could do the same if at least 25% of the holders of any series of notes demand it. The company has also had to grapple with an extended medical leave from chief executive officer Michael Pearson, who only returned recently, while pulling its financial guidance and delaying fourth-quarter results amid an investigation of its relationship to Philidor. Citron alleged that Valeant was engaging in sham transactions with pharmacy Philidor Rx to inflate drug sale numbers. But the problem is compounded further as Valeant repeatedly failed to provide investors with specific information, revised remarks too many times, and failed to follow standard accounting rules.