Why is VRX Stock in Shambles Right Now
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares have plummeted. VRX stock dropped another 19% today, furthering what has already been a brutal 2016 for the company.
There’s a lot to unpack in the tale of VRX stock.
First, the news. Valeant is reporting a third-quarter loss of $1.22 billion, primarily as a result of a write-down of Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP), a company it acquired last year. The net loss was equal to $3.49 per share, against a profit of $0.14 per share in the third quarter of last year. (Source: “Embattled Valeant Pharma reports 3Q loss, slashes guidance,” CTV News, November 8, 2016.)
To make matters worse for the beleaguered drug company, 2017 doesn’t look like it will provide much relief. In a conference call Tuesday morning, Valeant executives said that 2017 would also likely be a down year, as new competition enters the market. Specifically, there are alternatives to “Nitropress” and “Isuprel,” two neurology drugs made by Valeant that lose market exclusivity next year.
Chief Financial Officer Paul Herendeen said there would be a “material” drop-off in its generic drug business. “We will dig our way out of part of the growth hole … but we will not crawl all the way out of that hole [in 2017],” said Herendeen. “It will be a down year.” (Source: “Valeant Pharmaceuticals International Inc shares are plunging as it slashes forecast after big loss,” Financial Post, November 8, 2016.)
And this could not be coming at a worse time for VRX stock. The shares are down a whopping 85% since the beginning of the year. Two former executives are rumored to be under investigation by U.S. prosecutors for fraud.
At a time when there has rarely been more scrutiny on pharmaceutical companies hiking prices, Valeant was reported to have raised the price of its lead-poisoning drug by 2,700%. (Source: “Valeant hiked lead poisoning drug price by 2,700 per cent: report,” CTV News, October 11, 2016.)
Valeant is looking to sell off parts of its company in order to pay down some of the debt it has accumulated, which stands at $31.0 billion. All in all, it seems that tough times are ahead for VRX stock.