Valeant to cut drug prices at Walgreens

Valeant Pharmaceuticals International has unveiled a partnership with Walgreens Boots Alliance to replace the mail-order pharmacy that had helped patients fill prescriptions for the company’s pricey skin and other drugs.

The company expects double-digit same store organic sales growth from its business next year, due to be mainly driven through volume.

Valeant’s practice of hiking prices on newly acquired drugs is now being examined by a special U.S. Senate subcommittee. The stock had previously closed at $94.14. The latest letter from Rep. Elijah Cummings is his third letter since August asking Mr. Pearson for the company’s pricing records.

The drug deal comes six weeks after the company had cut ties with specialty online pharmacy Philidor. Prices on affected drugs are expected to fall from five to 95 percent, the companies said.

Valeant shares leapt 15%. Cummings also requested a host of additional documents regarding the company’s compliance with federal securities laws. On the surface, that would seem like a negative for Valeant Pharmaceuticals, but it’s based on the 2015 sales by Walgreens.

In a statement, Pearson said, “We have listened to what the marketplace is saying and we’ve taken positive steps to respond”.

“Investors were looking for a definitive track forward for Valeant (in a post-Philidor world) with its pharmacy and distribution strategy”, Umer Raffat, an analyst at Evercore ISI, wrote in a note to clients.

Valeant’s stock price is now impacted by the high degree of uncertainty created by the shutdown of Philidor and the corresponding investigation of allegations, recent political scrutiny of the pharmaceutical industry, negative press coverage of Valeant, and technical trading factors.

However, Pearson said a distribution deal with a prominent us drugstore chain, Walgreens, is a better arrangement than the one with Philidor, a low-profile company that distributed specialty drugs for Valeant. It has held a series of investor calls as it struggles to dispel the bad publicity it has suffered, following a damning report from short seller Citron Research, which had accused it of using Philidor to falsify revenue.

“Your refusal to provide any documents or witnesses is obstructing this congressional investigation and preventing a full understanding of your company’s suspect actions”, the letter states. The deal, which the drug maker said it would offer to some other pharmacies, includes plans to cut wholesale prices of Valeant’s branded prescription therapies in dermatology and ophthalmology by 10% starting in the first quarter of 2016.

Currently, Valeant has an average rating of “buy” and a consensus target price of $163.62. The stock shot up by more than 16.8% yesterday as a result, with many awaiting today’s investor conference with renewed hopes.