Valeant to offer discounted drugs in distribution agreement with Walgreens

Valeant announced the new distribution deal with Walgreens Boots Alliance Inc on Tuesday, boosting shares. The company jacked up prices on both drugs shortly after buying them from Marathon Pharmaceuticals in February, tripling one and raising the other sixfold. Valeant cut prices 10% across the board, and Walgreens and Valeant agreed to distribute more than 30 Valeant products at generic prices where generics are available, which could cut prices 95%. By teaming up with a trusted pharmacy like Walgreens, Valeant is sure to ease the minds of its investors. The projection marked a drop from earlier guidance of $11.67 to $11.87 earnings per share on total revenue of $11 billion to $11.2 billion.

After issuing an initial 2016 forecast on October 29, Valeant said in a statement Wednesday that its primary measure of profits, adjusted EBITDA, or earnings before interest, tax, depreciation and amortization, will be $6.9 billion to $7.1 billion, down from the $7.5 billion it had previously predicted. Under the agreement, which replaces its controversial distribution agreement with specialty pharmacies such as Philidor, Walgreens will sell certain Valeant drugs at a discount.

CEO Michael Pearson held as many as three tele-conferences to defend Valeant’s future growth strategy last month; yet none of these interactions was able to answer all questions that linger in the minds of investors.

For 2016, Valeant expects adjusted earnings to range between $13.25 and $13.75 per share, below expectations for $14.20.

Valeant’s stock price is now impacted by the high degree of uncertainty created by the shutdown of Philidor and the corresponding investigation of allegations, recent political scrutiny of the pharmaceutical industry, negative press coverage of Valeant, and technical trading factors.

Congressional committees have targeted Valeant as they investigate huge hikes in prices for some drugs, which have become a top concern for consumers and a big issue in the 2016 presidential campaign. It will also include Valeant’s over-the-counter portfolio and provide as much as $600 million in annual savings to the USA health-care system, the document said. Valeant said it would sever all ties with Philidor and has defended its accounting and distribution practices.

In particular, Cummings wants more information from Valeant regarding its relationship with Philidor, a specialty pharmacy. For example, Valeant bought the life-saving heart drugs Nitropress and Isuprel in February, then tripled the price of one and raised the other sixfold. The stock shot up by more than 16.8% yesterday as a result, with many awaiting today’s investor conference with renewed hopes.

Valeant will trim prices by about 10 percent for branded prescription-based dermatology and ophthalmology products distributed through Walgreens’ more than 8,000 US pharmacies.