Valeant regains some recent losses after Philidor restatement details announced

LAVAL, Que. -- Valeant Pharmaceuticals shares got a positive bounce Tuesday after the company announced that its restatement of financial results for 2014 and 2015 involve just US$58 million of sales to Philidor were recognized at the wrong time.

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The Quebec-based company said late Monday that it should have recognized the revenue when the products were dispensed to patients, rather than when delivered to Philidor -- an associated company that sold some Valeant drugs.

The stock (TSX:VRX) was at $110.94 shortly after the Toronto Stock Exchange opened, a gain of $6.78 or 6.5 per cent from Monday's close.

The stock had fallen more than $25 per share in the previous three sessions, including $12.84 on Monday amid news reports that a financial restatement was in the works.

Valeant said it estimates that its 2014 earnings will be reduced by 10 cents per share, in U.S. currency, and 2015 earnings will be increased by nine cents per share.

The amounts involved with the Philidor restatement are tiny compared with Valeant's total revenue and profit in 2014. It reported US$8.3 billion of revenue and $1.56 per share of earnings for the 12 months ended Dec. 31, 2014.

At least one analyst said the selloff was overdone, if it is based on concerns over the delayed release of fourth-quarter earnings as a result of the restatement.

"On an ongoing basis, we believe Philidor risk is mostly mitigated (except for potential penalties etc)," Douglas Miehm of RBC Capital Markets wrote in a report.

He said the successful implementation of a program with Walgreens to replace Philidor satisfies operational concerns. Walgreens is one of the biggest pharmacy retail chains in the United States.

Apart from the disruption caused by any financial restatement by a publicly traded company, Valeant is coping with a previous controversy that erupted last fall when questions were raised about its relationship with Philidor Rx Services.

Valeant's shares fell from $148.66 to $118.61 in heavy trading on Oct. 21. The stock has continued to trade below those levels and hit a 52-week intraday low of US$69.33 in New York on Nov. 18.

Valeant said on Oct. 30 that it had severed ties with the Pennsylvania-based online specialty pharmacy company after reviewing its practices. Philidor subsequently announced that it would cease operations.


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