Valeant Files Overdue Annual Report, Makes Sweeping Board Changes--Update
April 29 2016 - 10:15AM
Dow Jones News
By Michael Rapoport, Jacquie McNish and Anne Steele
Valeant Pharmaceuticals International Inc. filed its overdue
annual report on Friday morning, resolving the looming danger of
debt default and at the same time revealing a number of new
investigations into its business practices.
It also outlined sweeping board changes as it seeks to change
its tone at the top of the company, moves The Wall Street Journal
had reported on Wednesday.
The filing, known as a 10-K, had been delayed as Valeant sorted
out its financials after an internal investigation found an error
that prompted an earnings restatement.
Valeant had said it aimed to file the report by April 29 to
avoid being considered in default by its lenders. It said it had
received notices of default on some of its senior notes because it
hadn't filed the report on time, though they had been waived. On
Friday, Valeant said the defaults were "cured in all respects" by
the report's filing.
Valeant also offered new information about ongoing Justice
Department investigations and disclosed new state investigations.
It said two probes by districts in Massachusetts and the Southern
District of New York relate to matters including its patient
assistance program, former relationship with the specialty pharmacy
Philidor Rx Services LLC and its accounting treatment of sales to
specialty pharmacies. The company said the investigations also
focus on financial support provided by Valeant for patients, its
distribution of products and information provided to the Centers
for Medicare and Medicaid Services.
The company also disclosed in the filing that it is under
investigation by the states of North Carolina and New Jersey.
Valeant has previously disclosed that it is under investigation by
multiple regulators over its drug pricing and other issues.
The filing also offers more detail about what happened with its
revenue transactions through mail-order pharmacy Philidor Rx
Services LLC that forced it to restate earnings.
Valeant has previously said it recognized $58 million in revenue
through Philidor too early, and it confirmed that amount in
Friday's filing; in the 10-K, it adds that those transactions
included "fulfillment of unusually large orders with extended
payment terms and increased pricing, " an "emphasis" on delivering
product before Valeant executed an option to purchase Philidor, and
"filling a substitute order of equivalent value for an unavailable
product."
Valeant said Friday that following the review, net income for
the 2014 fiscal year was dented by about $33 million and earnings
by 9 cents a share.
The audited financial statements released Friday restate results
for the year ended Dec. 31, 2014, the three months ended Dec. 31,
2014, the three months ended March 31, 2015, the six months ended
June 30, 2015, and the nine months ended Sep. 30, 2015.
The company said it also identified misstatements in the first
quarter of 2015, consisting primarily of the reversing effect on
earnings of the 2014 misstatements, which reduce revenue by about
$21 million, increase net income by about $24 million and increase
earnings by about 7 cents a share. The company had previously
reported first-quarter earnings of $74 million, or 21 cents a
share, on revenue of $2.19 billion.
Valeant said its report was audited and found clean by
PricewaterhouseCoopers LLP.
Valeant also separately outlined changes to its board of
directors as the company, still under fire from lawmakers and
investors, looks to change the tone among its top brass.
William Ackman, a Valeant director and major shareholder, had
signaled change was coming during his testimony at a Senate
Committee hearing on Wednesday during which he, outgoing CEO
Michael Pearson and director Howard Schiller faced tough
questioning over Valeant's widespread drug price increases.
"A lot of the board is going to turn over," Mr. Ackman told the
committee. He also promised swift changes to the expensive price
tags on many Valeant drugs. The board reshuffling follows the
addition of four new directors, including Mr. Ackman, earlier this
year.
Mr. Pearson is set to depart the company soon, to be replaced as
chief executive by Joseph Papa, whom Valeant lured away from
Perrigo Co. Mr. Papa is expected to start work for Valeant on
Monday.
Shares of the company were up 3.6% in premarket trading to
$36.50.
Write to Michael Rapoport at Michael.Rapoport@wsj.com, Jacquie
McNish at Jacquie.McNish@wsj.com and Nathan Becker at
nathan.becker@wsj.com
(END) Dow Jones Newswires
April 29, 2016 10:00 ET (14:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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