Drugmaker Valeant cuts guidance, warns next year will be worse

By Rod Nickel and Ankur Banerjee

(Reuters) - Valeant Pharmaceuticals International Inc on Tuesday cut guidance for the year and warned that 2017 could be even more challenging as some products face new competition, sending shares spiraling lower.

Nitropress and Isuprel are among Valeant's neurology drugs that lose market exclusivity by next year, and there is also likely to be a "material" dropoff in its generics business, said Chief Financial Officer Paul Herendeen, who started work in September.

The result will be lower overall revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) next year, Herendeen said on a conference call with analysts.

Core businesses should see revenue and EBITDA growth, he said.

"We will dig our way out of part of the growth hole ... but we will not crawl all the way out of that hole" in 2017 Herendeen said. "It will be a down year."

Valeant's U.S.-listed shares fell 22 percent to $14.92 in morning trading on Tuesday, touching a more than six-year low.

The company, whose biggest investor is Bill Ackman's Pershing Square Capital Management, replaced former chief executive Mike Pearson with Joe Papa in spring as it seeks to rebuild trust with investors. Steep drug price increases and its unorthodox use of a specialty pharmacy under previous leadership drew scrutiny of politicians and regulators.

Analysts have also raised concerns about Valeant repaying its $30 billion debt pile after years of serial acquisitions under Pearson.

Herendeen emphasized that he was not offering formal guidance for 2017, and simply wanted to be transparent.

But one analyst expressed skepticism that the company has the right plan beyond cutting costs and investing in research and development.

"I'm hearing more Bandaid solutions. Am I missing something?" Stifel analyst Annabel Samimy asked executives.

Papa said the company was taking numerous steps, including recruiting new executives.

The Laval, Quebec-based company expects total revenue of $9.55 billion-$9.65 billion in 2016, down from its previous forecast of $9.9 billion-$10.1 billion.

Adjusted earnings are forecast to be $5.30-$5.50 per share, compared with the previous forecast of $6.60-$7.00.

Valeant has received significant inquiries from potential buyers for its assets, Papa said, without giving specifics.

The company took a charge of $1.05 billion in the latest quarter, reflecting lower fair value of some U.S. businesses, mainly Salix, which makes irritable bowel syndrome drug Xifaxan.

Valeant said last week it was in talks with third parties to sell Salix and some other assets.

The company reported a smaller-than-expected quarterly adjusted profit due to faltering sales of its dermatology products and Xifaxan.

Valeant's net loss was $1.22 billion, or $3.49 per share, in the third quarter, compared with a profit of $49.5 million, or 14 cents per share, a year earlier.

Excluding items, Valeant earned $1.55 per share, well below analysts' average estimate of $1.73, according to Thomson Reuters I/B/E/S.

Revenue fell 11 percent to $2.48 billion.

(Reporting by Ankur Banerjee in Bengaluru and Rod Nickel in Winnipeg, Manitoba; Editing by Maju Samuel and Marguerita Choy)