Valeant says it's on road to recovery despite cutting forecasts for 2015

Valeant Pharmaceuticals says it's on the road to recovery after taking big financial and PR hits from its association with a controversial U.S.

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mail-order pharmacy.

The Quebec-based company expects its revenues and adjusted earnings will increase by double digits in 2016 and its battered share price will once again reflect the fundamentals of its business.

"We have been through a lot," CEO Michael Pearson told investors during a four-hour webcast.

Pearson said he was "pissed" at the "false" allegations about the company from a short seller that drove its share price collapse and prompted some calls for him to be replaced.

"If the board wants to fire me they are welcome to fire me but until they do we're going to get through this thing."

Valeant said the October split from specialty pharmaceutical partner Philidor Rx Services caused a big short-term disruption to its business that will reduce its expectations for the fourth quarter and 2015 as a whole.

However, Pearson said a new distribution deal with a prominent U.S. drugstore chain, Walgreens, is a better arrangement than the one with Philidor, a low-profile company that distributed specialty drugs for Valeant.

Despite cutting prices, Valeant expects it will make more money by gaining access to the 8,000-store network of the largest American pharmacy retailer.

"The opportunity for volume growth is huge," he told analysts.

Pearson said Walgreens was "courageous" for partnering with Valeant given the negative attention heaped on the company in the last few months.

"(But) we both fundamentally believe that this is going to change the industry, it's going to create enormous value for both our shareholders."

Valeant conceded the company, which has been accused of price-gouging for some of its products, has altered its strategy to pursue volume growth by lowering prices and reducing costs.

The deal with Walgreens is forecast to deliver up to US$600 million in annual savings to the U.S. health-care system starting next year after Valeant agreed to cut the prices of several of its drugs as part of the distribution agreement.

Alex Arfaei of BMO Capital Markets said the 2016 revenue guidance of US$12.5 billion to US$12.7 billion is in line with forecasts, but targeted earnings are weaker than predicted.

That "indicates to us that the increase in expected volume from the Walgreens agreement is not enough to offset the loss of more profitable products from the specialty pharmacy business at higher prices, at least in the near term," he wrote in a report.

The Montreal-area company's previously obscure relationship with Philidor and its pricing policies, which are under investigation by U.S. authorities, have contributed to a major decline in the company's stock.

Shares were up nearly eight per cent to $161.26 in Wednesday afternoon trading on the Toronto Stock Exchange.

That's compared to the 52-week low of $92.65 and the $347.84 high in August before its troubles began.

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.

A high-ranking U.S. politician released a letter sent to Valeant that accuses the firm of failing to disclose information as requested and obstructing the congressional investigation.

"Your refusal to provide any documents or witnesses is obstructing this congressional investigation and preventing a full understanding of your company's suspect actions," wrote Elijah Cummings, the committee's ranking Democrat.



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