Valeant Pharmaceuticals (VRX) is doing all it can to convince investors that the suffering pharma can extricate itself from a mess of regulatory scrutiny and concern over its accounting practices -- and dismal growth prospects.
But those hopes were seriously dented on Tuesday morning when shares of the specialty drugmaker cratered off a dismal 2016 outlook and quarterly earnings miss, with shares falling more than 45% in morning trading Tuesday.
"It's uninvestable -- it's a black box," Citron Research's Andrew Left said in a phone interview with Real Money. "I'm not saying it's going to zero, but $56 is better than zero and you can make your money elsewhere."
Valeant posted adjusted earnings per share for the quarter of $2.50, missing Wall Street consensus estimates of $2.62 by 4.5%, while sales of $2.79 billion moderately beat forecasts by under 1%.
The miss was exacerbated by a full-year sales projection of $11 billion to $11.2 billion for 2016, down from previous forecasts of up to $12.7 billion. Meanwhile, annual earnings per share forecasts of $9.50 to $10.50 are down from a previous range of up to $13.75.
"It's a big ship to turn around, and with something like Valeant, the value of its salesforce is a lot greater than the value of its products," Left added. "As the stock price goes down, the morale of the salesforce goes lower as well."
"This shortfall was caused by unexpected reductions in higher-margin product sales driven in part by channel de-stocking and negative reaction to our agreement with Walgreens," CFO Robert Rosiello said on a premarket earnings call with analysts Tuesday. (Valeant inked its branded-access partnership with Action Alerts PLUS name Walgreens Boots Alliance (WBA) in December as a means to build out a distribution network of independent pharmacies, largely to replace a former tie-up with mail-order prescription firm Philidor.)
"We are realizing the decrease of approximately $0.80 per share coming from the underperformance in several businesses," Rosiello added. "This includes slower-than-expected growth in GI [gastroenterology], including additional product de-stocking. We are also realizing a slower-than-expected rebound in dermatology that includes additional product de-stocking and loss refills from the Philidor transition for Walgreens."
(Walgreens is a member of Jim Cramer's Action Alerts PLUS charitable trust.)
CEO Michael Pearson said more than 90% of doctors who were using Philidor are now using the Walgreens distribution model, which could prove a beacon for future clients.
Valeant also highlighted the imperative to pay down about $1.7 billion in debt this year alone, along with the need to file its annual report with the SEC next month in order to avoid a technical default. The filing had been delayed since February following the SEC's discovering of accounting mismanagement of the drug maker's sales reporting tied to the Philidor partnership.
"It's a spiral: You have every insurance company and the specialty pharmas looking at everything coming through on the Valeant letterhead and saying, 'Ok, what's going on here?' Left added. "They put themselves in this situation so you can't feel bad for them." Left also noted that hedge fund manager Bill Ackman's claims that Valeant's problems are behind it were debunked today by Pearson's comments.
Valeant's troubles most recently hit the public spotlight when Democratic primary candidate Hillary Clinton, in a campaign video, characterized Valeant's drug pricing as "predatory," recounting in a campaign video the story of a woman who's cost of Valeant's migraine medications had skyrocketed since the 1980s from $180 for 10 shots to $15,000 for the same dosage.
Left questioned such rhetoric on a crackdown of Valeant's pricing model, saying, "If you're being reimbursed by insurance, what's the big deal? Everyone knew it was unethical -- now you're going to run an ethical business and not a profitable business?"
Shares of Valeant are down 51% on the year amid a Congressional investigation into the drug maker's pricing and a continued SEC probe into its bookkeeping of sales and related financial reporting.