Valeant Pharmaceuticals' (VRX) shareholders were running for the hills Friday after San Francisco-based McKesson (MCK) pharmaceutical distributor announced a competitor is "significantly" undercutting drug prices. (Valeant is a member of Real Money's Stressed Out watch list.)
"What we began to see more recently is competitive activity that is broader than our original expectations, more aggressive, and across several areas of our U.S. pharmaceutical business," McKesson CEO John Hammergren said on an earnings call with analysts. "When a competitor significantly undercuts our existing pricing, we are compelled to respond," he added, without disclosing which among its competitors have been slashing prices the most.
Shares of Valeant, which is laden with roughly $31 billion in debt and slated to roll out earnings Nov. 8, fell roughly 6% in afternoon trading following Hammergren's comments.
The Canadian based drugmaker has been among the most embroiled in controversy over drug prices, especially after Democratic presidential candidate Hillary Clinton attacked the company for "predatory pricing" strategies and "gouging" patients by raising prices on acquired drugs.
And the industry has broadly found itself under renewed pressure to reduce drug prices on the back of increased regulatory and media scrutiny, especially following the controversy over the exorbitantly raised prices on Mylan's (MYL) anti-allergy EpiPen product.
Valeant shares are now down about 80% on the year, amid the controversy surrounding price hikes on products acquired over years of debt-fueled acquisitions that led to the replacement of its CEO Michael Pearson with former Perrigo (PRGO) CEO Joseph Papa. Valeant's problems were compounded by an SEC probe into its former partnership with mail-order pharmacy Philidor, in which Valeant acknowledged that $58 million worth of revenue was booked improperly, as well as the delay of its annual and first-quarter filings with the Securities and Exchange Commission.
Shares of McKesson were also down about 25% on CEO Hammergren's comments and the company's fiscal second-quarter earnings whiff.
