Valeant Pharmaceuticals International, Inc. VRX continues to be a Zacks Rank #5 (Strong Sell) stock with waves of bad news hitting the company. The company’s shares plunged 6.6% on Wednesday after it asked its lenders for another month to file its annual report, thereby reducing the risk of default if it misses the current deadline of Apr 29.
Valeant is seeking to extend the deadline for filing its 2015 annual report (Form 10-K) to May 31, and the deadline to file its first-quarter report (Form 10-Q) to Jul 31. Under the terms of its credit facility, the company currently faces an Apr 29 deadline for its annual report, and a Jun 14 deadline for its first-quarter results. A failure to file the reports within the stipulated deadline would lead the company to be in default on its credit facility.
The company is also asking its lenders to amend the covenant on interest coverage maintenance and certain financial definitions which would provide it additional leeway in its financial covenants.
We note that Valeant shares took a beating when the company announced its fourth quarter results along with a lowered annual and quarterly guidance. The company has been witnessing a slowdown in many of its businesses, primarily driven by sluggish growth in the gastrointestinal business. This is because of the drop in the company’s wholesale and retail business in reaction to its agreement with Walgreens Boots Alliance, Inc. WBA.
To add fuel to the fire, the company’s chief executive officer (CEO), J. Michael Pearson, received a subpoena from the Senate Aging Committee a couple of days ago. The CEO has been asked to testify before the committee on Apr 27 in connection with the price hike issue. This is the third hearing in a row that the committee is conducting to investigate sudden aggressive price hike of Rx drugs that have been around for decades.
Valeant has been under the spotlight since Aug 2015 for all the wrong reasons – a price hike of specialty drugs, erroneous financial reporting, and termination of contracts with Philidor Rx Services. The company’s shares started their downward journey when drug stocks took a hit due to increasing media and political focus on drug prices.
Valeant is definitely not on the cards for the investors. Instead, they should focus on better-ranked stocks with a Zacks Rank #1 (Strong Buy). A couple of such stocks in the health care space are AMAG Pharmaceuticals, Inc. AMAG and Emergent BioSolutions, Inc. EBS.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment