Tags: Valeant | shares | drug | accounting

Valeant Shares Gain 8 Percent After Accounting Change Plans

Tuesday, 23 Feb 2016 11:50 AM

Shares of Valeant Pharmaceuticals International Inc rose 8 percent on Tuesday, the morning after the drugmaker said a board committee investigation into its dealings with distributor Philidor Rx Services would result in a profit restatement.

Valeant said based on the preliminary review, it would restate results for 2014 and 2015 to reflect its findings that some revenue should have been recognized at the time drugs were dispensed to patients, not when they were delivered to Philidor.

The company, based in Laval, Quebec, said it would release unaudited earnings on Monday and hold a conference call.

Valeant shares, which were trading at $82.71 on Tuesday morning, fell more than 19 percent on Friday and Monday after Wells Fargo initiated coverage with an "underperform" rating and a valuation of $65 to $68 per share. Wells Fargo analyst David Maris said on Tuesday in a follow-up note that the restatement could unsettle investors.

Evercore ISI analyst Umer Raffat said investors were expecting a big restatement after the Wall Street Journal on Monday evening reported that the company was about to announce an earnings restatement, based on unnamed sources. Valeant sent out its own press release on Monday night.

"It ended up being fairly benign," Raffat said in an email.

One investor who asked for anonymity said that the fact that the company finally set an earnings announcement date also was a relief.

"People were imagining all sorts of stuff. There definitely could have been worse reasons behind it," the investor said.

Valeant cut ties with Philidor Rx in October after it was revealed that the distributor had used aggressive tactics to try to increase insurer reimbursements, mostly for dermatology drugs, to help the Valeant inflate revenue. Valeant also said it would have an ad hoc committee investigate the arrangement in which it had an option to buy the company and therefore was consolidating its financial results.

The restatement will reduce its reported 2014 GAAP earnings by about 10 cents per share and increase 2015 GAAP earnings by about 9 cents per share, Valeant said.

"We view this as a marginal impact and certainly not one that warranted the significant pressure late in the day and after market yesterday," Stifel analyst Annabel Samimy wrote in a client note.

© 2017 Thomson/Reuters. All rights reserved.

   
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Shares of Valeant Pharmaceuticals International Inc rose 8 percent on Tuesday, the morning after the drugmaker said a board committee investigation into its dealings with distributor Philidor Rx Services would result in a profit restatement.
Valeant, shares, drug, accounting
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2016-50-23
Tuesday, 23 Feb 2016 11:50 AM
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