Valeant Shares Rise on Deal with Walgreens

Valeant and its Chief Executive Michael Pearson have come under pressure for steep price increases on some of Valeant’s drugs and for close ties to a specialty pharmacy that used aggressive methods to overcome insurer barriers to reimbursing its medicines.

In recent months, Valeant caused a furor by sharply increasing prices for heart drugs shortly after buying them from Marathon Pharmaceuticals, a small drug developer from suburban Chicago.

Shares fell further when Valeant in October cut ties with Philidor, saying it had lost confidence in the company. The stock shot up by more than 16.8% yesterday as a result, with many awaiting today’s investor conference with renewed hopes.

Valeant also said it will cut its debt by about US$2.25 billion in 2016 and book revenues of US$12.5 billion to US$12.7 billion, compared with 2015 sales it estimated at US$10.4 billion to US$10.5 billion.

For example, Valeant said it would offer a 10 percent discount off wholesale prices on many of its skin and eye medications, including Jublia and Solodyn.

JPMorgan Chase & Co. dropped their price objective on Valeant Pharmaceuticals Intl from $265.00 to $225.00 and set an “overweight” rating for the company in a report on Wednesday, November 11th. “This will turn it all into volume”. For 2016, Valeant expects total revenue in the range of $12.5-12.7 billion and adjusted EPS to lie within $13.25-13.75 per share. The average price decrease is expected to be more than 50 per cent, with reduced prices ranging between five and 95 per cent.

So while this deal may be saving the system $600 million, it’s costing Valeant $600 million in revenue.

Pearson said Walgreens was “courageous” for partnering with Valeant given the negative attention heaped on the company in the last few months. Valeant doesn’t have to provide the documents Cummings requested in his letter either, but if it refuses, Congress can also issue a subpoena.

“In an e-mail to Bloomberg, Valeant spokeswoman Laurie Little, said”, We disagree with numerous Congressman’s statements. “We will have double-digit organic growth, not just next year, but the year after that and the year after”, Pearson predicted.

In other news, Director Ronald Harold Farmer purchased 1,500 shares of the company’s stock in a transaction on Wednesday, October 21st.

In summary, if the stock rises to $165 or more by January 2017, we will make more than 10 times our net investment over this period. Rather than working with a middleman, Valeant can distribute its products directly to Walgreens. Is it in talks with other distributors?

One thing’s for sure: After a topsy-turvy 4th quarter, Valeant isn’t willing to go down without a fight.

On Tuesday, Pearson walked away from that description of his company.