Facing negative investor sentiment as its financial results fall well short of estimates, company moves to shore up its Canadian production
LAVAL, Que.—Valeant Pharmaceuticals International Inc. has announced plans to invest $8 million in its Steinbach, Man. manufacturing plant even as its investors have been sent scrambling by the company’s latest quarterly financial report.
The investment will support the Laval, Que-based pharma firm’s plan to shift North American production of Xifaxan and Apriso—antibiotic and anti-inflammatory drugs—to the southern Manitoba city.
“Since 2012, Valeant has transferred 27 technologies for manufacture at Steinbach, in addition to investing in major improvements to the site in order to maintain competitiveness at the international level,” Jacques Dessureault, president of Valeant Canada, said. “It is evidence of our continuing business strategy to grow our Canadian capacity and increase our export sales.”
The investment announcement followed Valeant’s reporting of its delayed first-quarter financial results June 7—which showed the company’s adjusted earnings fell well short of its own estimates.
The firm’s adjusted earnings were US$442.6 million or $1.27 per share, down from $704.2 million or $2.05 per share in the first quarter of 2015.
The adjusted earnings were also below the low end of a range from between $1.30 and $1.55 per share, which Valeant reiterated as recently as a month ago.
Analysts had estimated $1.37 per share, according to Thomson Reuters.
The company said revenue from high-margin dermatology products was lower due to changing market dynamics and the addition of lower-margin products acquired last year.
Revenue was up nine per cent to $2.37 billion—within the company’s guidance—largely from acquisitions. Before adjustments, Valeant had a US$373.7 million loss in its first quarter.
Valeant’s delay in issuing the financial report for the first three months of 2016 had prompted bondholders to warn the company that it was in danger of defaulting on their agreements if the filing wasn’t made by late July or early August.
“The first quarter’s results reflect, in part, the impact of significant disruption this organization has faced over the past nine months,” said Joseph Papa, who recently became Valeant’s chairman and chief executive officer.
“This has been a difficult period for Valeant and its stakeholders, and while there are some challenges to work through in certain business operations in 2016, such as our U.S. dermatology unit, the majority of our businesses are performing according to expectations.”
The Quebec-based drug maker’s net loss, reported in U.S. currency, was equal to $1.08 per share.
That compared with a year-earlier profit of $97.7 million or 29 cents per share—prior to a series of setbacks that began taking a toll on Valeant last summer.
Valeant also lowered key financial estimates for the full 2016 financial year. It now expects revenue of between $9.9 billion and $10.1 billion and adjusted earnings of between $6.60 and $7 per share.
Its previous estimate was for between $11 billion and $11.2 billion of revenue and between $8.50 and $9.50 per share of adjusted earnings.
“We believe that the street will view this significant guidance reduction negatively… Subsequently, we believe that the equity could come under pressure today as the guidance could be too close for comfort for many investors,” RBC Dominion Securites analyst Douglas Miehm wrote in a note before stock markets opened.
In extended trading, Valeant shares were at US$25.60, two hours before regular trading—down 11 per cent or $3.25 from the previous close on the New York Stock Exchange.