Valeant Pharmaceuticals International Inc. plunged 50 percent on Tuesday after it said it might default on its US$30 billion debt because of a delay in filing its annual report.
The Canadian drugmaker also slashed its 2016 sales and earnings outlook, Reuters reports.
Bill Ackman, whose Pershing Square Capital Management is one of Valeant’s largest shareholders, todd investors that he would take a much more active role there.
Wall Street analysts pressed chief executive Michael Pearson for answers.
One asked how management can be trusted, given its earlier positive outlooks and another questioned whether Pearson has the support to lead the company.
“It starts with me,” Pearson said. “We have to meet or exceed this guidance, and I think we all recognize that. It’s a bit of a starting-over point.”
Valeant’s stock, which was at a high of US$263.70 in August, tumbled to US$34.54 in New York trading, its biggest decline ever.
The value of stakes held by Pershing Square and ValueAct, another large investor, lost about US$700 million in one day.
Investment firm Ruane, Cunniff & Goldfarb, its largest holder, lost US$1.6 billion and T. Rowe Price lost US$1 billion, according to a Reuters review of investor regulatory filings.
“Our business is not operating on all cylinders but we are committed to getting it back on track,” said Pearson, who returned last month from a medical leave of absence.
For years, Valeant was an investor darling, buying up assets and delivering double-digit profit growth.
It bought companies and raised prices on their drugs, a strategy that has collapsed under scrutiny of high drug spending.
At the same time, its unusual financial relationship with a pharmacy selling most of its highly profitable dermatology drugs began to fall apart in the fall of 2015 and its shares slid.
The company is looking to sell some non-core assets, Pearson said, without elaborating.
Valeant, the target of US investigations into its business and accounting practices, said it would put off filing its annual report with US regulators but for the first time raised the specter of a default.
It said failure to file the report by Tuesday’s deadline would put it in breach of agreements with its lenders and that holders of at least 25 percent of any series of notes may deliver a notice of default.
A default would mean that bondholders could demand Valeant repay its debt immediately, Covenant Review analyst Anthony Canale said.
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