Valeant stock rises on deal to cut prices for Walgreen customers

The company faces several U.S. investigations, including at a committee of the U.S. House of Representatives that will be holding a hearing in the new year on increasing prices for medication.

US federal agencies are also investigating the company for potentially cornering a part of the specialty contact lens market through its acquisition of Paragon Vision Sciences.

The company also forecasts earnings before interest and taxes of $6.9 billion to $7.1 billion in 2016 compared to previous estimates of $7.5 billion, but significantly higher revenues compared to 2015.

Valeant on Wednesday lowered its per-share 2015 profit expectations to $10.23 to $10.33, from between $11.67 and $11.87 – well short of the $11.11 that Wall Street had projected.

Analysts were expecting a profit of $11.11 per share, according to Thomson Reuters I/B/E/S. The letter came just a day after Valeant announced its new distribution partnership with Walgreen’s to replace the controversy-stricken Philidor.

But from a consumer’s perspective, Walgreens WBA, +2.39% is not the new Philidor: Walgreens is “not the primary distributor” for Valeant, Walgreens spokesman Michael Polzin told MarketWatch, meaning the pharmacy won’t carry Valeant’s full drug portfolio. We believe that this agreement will go a long way to addressing concerns about the disruption to Valeant’s dermatology business by expanding convenient and affordable access to Valeant products, and will help restore credibility by the company partnering with the largest and best-managed pharmacy chain. Now, though, he says Valeant has listened up and “taken positive steps to respond”.

The company had announced that it was laying out a new dermatology program for patients soon after the Philidor Rx debacle (which included accusations of shoddy accounting and business practices) and severing ties with the mail-order pharmacy.

Valeant cut its Q4 guidance, a move that was widely expected since it ended its relationship with specialty pharmacy Philidor after the latter was accused of misconduct and fraud.

Malhotra said patients and insurers should end up paying slightly less for the drugs covered by the deal, but Valeant will compensate with rebounding volumes and its savings from not having to give drug wholesalers fees of roughly 7 percent of drug prices. 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. Tom Gardner owns shares of Valeant Pharmaceuticals.

Those drugs were not mentioned in Tuesday’s announcement regarding price reductions, but the companies said they hope to expand their agreement “over time” to include other therapeutic areas.

He said Valeant could get three new drugs approved next year, when the company plans to use its cash flow to pay down debt, rather than acquire more businesses. Goldman Sachs cut Valeant Pharmaceuticals Intl from a “buy” rating to a “neutral” rating and dropped their price target for the stock from $180.00 to $122.00 in a report on Monday, November 2nd.