Valeant Breaches $40 After 2017 Guidance Correction On Tuesday Morning

Valeant Pharmaceuticals Intl Inc VRX plunged over 40 percent, touching a new 52-week low below $40 a share after the company reported a loss for its fourth quarter and slashed its 2016 outlook on Monday. The company additionally corrected its full-year 2017 EBITDA guidance lower on Tuesday morning, sending shares even lower.

The Canadian drug maker said its preliminary results report a loss of $336.4 million, or 98 cents per share. Excluding one-time items, earnings were $2.50 per share, far short of consensus earnings expectations of $2.61 a share. Revenue totaled $2.79 billion, topping Street views of $2.75 billion.

The company took a $79.0 million impairment charge related to Philidor Rx Services.

Potential Disagreement Between Management And Valeant Board

Meanwhile, Evercore analyst Umer Raffat said in a recent email to investors he senses some disagreement between the management and Board due to the following quote from CEO  Michael Pearson: "In discussion with the Board, we have assumed lower growth in our U.S. dermatology, gastrointestinal, and woman's health portfolios, as well as certain geographies like Western Europe, while keeping our expenses largely unchanged."

The company cut first quarter non-GAAP EPS outlook to $1.30 - $1.55 from $2.35 - $2.55, and revenue forecast to $2.3 billion - $2.4 billion from $2.8 billion- $3.1 billion.

Valeant also trimmed its 2016 adjusted EPS guidance to $9.50 - $10.50 from previous guidance of $13.25 - $13.75, and revenue outlook to $11.0 billion - $11.2 billion from previous guidance of $12.5 billion - $12.7 billion. 

The Canadian pharma company is facing several issues including a delayed filing of its 10-K, a potential earnings restatement, and the lack of clarity on the recently disclosed SEC probe. The latest developments have eroded investor confidence.

Most Important Catalyst?

According to Raffat, the company's clarification over the timing for covenants/10­K filing to avoid default (Mar 30 + 30 days) is by far the single most important catalyst for Valeant near­term (even more important than the unaudited numbers).

If the company does not file the Form 10­K by March 30, 2016, a default will occur under the company's bank credit agreement. Valeant then would have 30 days to cure the default.

The banks would be able to accelerate the loans under the credit agreement as a result of this default only in the event the company does not file the Form 10­K before the 30-­day cure period expires, the analyst highlighted.