Valeant surges 18% as company announced agreement with Walgreens

Embattled Valeant Pharmaceuticals is slashing its expectations for the current quarter and 2015 as a whole and issuing a guarded outlook for next year as well.

Valeant shares are still down 51% in the past three months, while the S&P 500 is up 3.4%.

Valeant Pharmaceuticals International (NYSE:VRX) announced on Tuesday a drug pricing as well as distribution agreement with pharmacy chain Walgreens Boots Alliance as the company looks to lower its prices and to expand the access to its different drugs. Its exploding debt load of more than $30 billion is expected to be reduced by an estimated $2.25 billion in 2016, with its net leverage ratio pegged to come down to almost four times of its pro forma adjusted EBITDA by next year’s end.

The price cuts don’t apply in Canada where Valeant doesn’t have similar distribution agreements with pharmacy retailers such as Shopper’s Drug Mart, Jean Coutu or the Rexall Group.

Valeant will reduce prices of its branded prescription-based dermatological and ophthalmological products by 10 percent.

“The opportunity for volume growth is huge”, Pearson said. Among the more egregious examples, Valeant bought the life-saving heart drugs Nitropress and Isuprel in February, then tripled the price of one and raised the other sixfold.

Patient advocates, doctors and Congressional leaders have attacked Valeant and drug companies like Turing Pharmaceuticals for aggressively increasing prices on some critically needed prescription drugs with little or no competition. One research analyst has rated the stock with a sell rating, eleven have assigned a hold rating, nineteen have issued a buy rating and one has assigned a strong buy rating to the company.

Financial analysts quizzed Valeant officials about the Walgreens deal during the investor presentation, questioning whether it would pass muster with pharmacy benefit managers.

On Tuesday, Morgan Stanley commented that Valeant going from Philidor to Walgreens gives the pharma company credibility, but also said in its analyst report that a great deal of questions remain.

Rep. Elijah E. Cummings, D-Maryland, wrote to Pearson, asking the Valeant CEO to provide the documents and interviews with company officials by January 8, 2016, before a committee hearing on soaring medication prices. Valeant also rolled back all price increases it had planned during the quarter.

Valeant is under investigation by the US government and lawmakers over the price increases and is conducting an internal investigation into the situation with the pharmacy.

The letter requests eight additional sets of documents by January 8, all of them related to Valeant’s dealings with Philidor. The stock’s slide worsened in the fall, when the Philidor allegations emerged, and shares fell to a low of barely $69.