Valeant’s outlook for the quarter, year and 2016 grows grim

That’s when questions about its drug price practices and organic growth collided with the revelation that its specialty pharmacy – a distributor called Philidor – was allegedly engaged in some shady practices in order to sell Valeant drugs. Valeant will distribute the drugs directly to Walgreens instead of through a middleman, and pay Walgreens fees for filling prescriptions.

Valeant Pharmaceuticals International Inc. shares surged more than 17% Tuesday, as analysts cheered the company’s new pricing and distribution pact with Walgreens Boots Alliance Inc., the biggest pharmacy chain in the U.S.

The Canadian company said it now expects…

Valeant said its expecting that the agreements, when implemented fully, to save the healthcare system as much as $600 million annually and allow consumers to access its different products easily from over 8,999 locations of Walgreen across the US, as well as participating retailers that are independent. According to Valeant’s CEO J. Michael Pearson on CNBC, Valeant will offer a 10% discount at Walgreens for more than 30 of Valeant’s branded drugs that have generic equivalents on the market.

Pearson had previously said that Valeant would take a short-term hit, including by focusing on debt reduction, in order to ultimately secure long-term gains.

Democratic Congressman Elijah Cummings, a ranking member of the house Committee on Oversight and Government Reform, and Senator Bernie Sanders, a ranking member of the of the Subcommittee on Primary Health and Aging, Senate Committee on Health, Education, Labor and Pensions, are investigating the recent abrupt increases in drug prices.

Valeant’s pricing practices have been under investigation by U.S. authorities, including at the U.S. Congress, since the company dramatically increased prices for some specialty products this year.

Bloomberg published a story on Valeant this morning that is getting less attention than the company’s price cut press release, but that nevertheless details potential weaknesses in Valeant’s governance that persist today. Please see our terms of service for more information.

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In summary, if the stock rises to $165 or more by January 2017, we will make more than 10 times our net investment over this period. Nevertheless, we will review his letter and respond appropriately. Company officials declined to comment on the progress of that review. In a worse-case scenario, which we believe is extremely unlikely to occur, we risked approximately 4% of additional capital on this investment while increasing our notional exposure to Valeant by about 6% of the portfolio. It will also need to prove to investors that this new volume-based model, which is not the model that made it a Wall Street darling, actually works. “We are confident that their deep industry and operational experience will be invaluable in helping guide the company as we prepare for the anticipated commercial launch of OCA for PBC and continue to advance our pipeline to address the significant unmet need in a number of chronic liver diseases”.