The Valeant Pharmaceuticals International Inc. (NYSE: VRX) stock price has come under pressure yet again this week following a new downgrade and significantly lowered company guidance.
Late last week, Valeant lowered its Q4 outlook and guided Q1 fiscal 2016 sales and earnings below Wall Street estimates.
The VRX stock price has now fallen 8.7% since Thursday, Dec. 17.
Valeant reduced its Q4 earnings per share (EPS) guidance to $2.55 to $2.65 from $4.00 to $4.20. Sales estimates were lowered to $2.7 billion to $2.8 billion from $3.25 billion to $3.45 billion.
The company said it lost approximately 20% of its prescriptions in Q4 due to a disruption in its pharmacy relationships. Valeant also lowered its full-year 2016 EBITDA to $6.9 billion to $7.1 billion from $7.5 billion.
Following the uninspiring update, Mizuho analyst Irina Koffler slashed her rating on Valeant to "Neutral" from "Buy."
A number of analysts have recently trimmed their ratings on Valeant stock. What makes the Koffler downgrade notable is that she was the sole Wall Street analyst to upgrade the besieged company in October when the Valeant stock price tumbled.
Valeant shares have been under pressure since mid-September.
The VRX stock price dropped after a federal investigation into its drug-pricing practices and a scathing report from short-seller Citron Research over its relationship with specialty pharmacy Philidor Rx. Citron went as far as to liken Valeant to Enron. Following all the damaging press, pharmacy benefits managers CVS Health, Express Scripts, and United Health OptumRX announced they would stop working with Philidor and Valeant.
The Valeant stock price caught a modest bid last week when the Canadian drug giant secured a deal to distribute some of its medicines through Walgreens Boots Alliance Inc. (Nasdaq: WBA) pharmacies.
But the good news was short-lived, and the VRX stock price fell more than 8% on Thursday and Friday.
We've been warning investors about the Valeant stock price for months and remain bearish into 2016...
Why We Saw the VRX Stock Price Drop Coming
Before the Valeant stock drop, VRX was one the stock market's best performers in 2015.
At its high of $263.81 in August, shares were up more than 83% on the year and 300% over the last five years.
Valeant grew rapidly as a serial acquirer of smaller companies. With each acquisition, Valeant cut research costs. It also domiciled in Canada for a lower tax rate.
Money Morning Global Credit Strategist Michael Lewitt saw the Valeant stock drop coming. Back on Oct. 4, Lewitt described Valeant as a "deeply troubled company" and warned that the company's troubles were just beginning.
Lewitt said the company is "emblematic of just about everything that's corrupt and toxic in today's market."
He cited Valeant's practice of bankrolling acquisitions with junk-bond financing, firing most of its employees, and hiking the prices of the drugs it had just purchased the rights to.
"Valeant's predatory business model places it at a disadvantage with investors because it depends on inflicting harm on people to make money," Lewitt said. "The bottom line is that Valeant is getting what it deserves. This predatory business model has enriched management and a bunch of hedge funds but has left everyone else with whom the company has come into contact severely damaged."
Money Morning Defense & Tech Specialist Michael A. Robinson says Valeant has become an "industry pariah." Investigations into sales and distributions "call the company's core operations into question, along with the steadiness and integrity of its leadership."
At $107.96, the Valeant stock price is down 25% year to date.
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