Valeant CEO Sees New Drug Pricing Environment Ahead

Valeant Pharmaceuticals (VRX) CEO Michael Pearson weighed in on the recently controversial topic of drug pricing

by

Published on Oct 19, 2015 at 11:08 AM

(Reuters) - Valeant Pharmaceuticals International Inc <VRX.TO>, which has come under fire for raising drug prices and is being investigated by the U.S. government, predicted on Monday that lower price increases are ahead for the whole industry.

Valeant CEO J. Michael Pearson told investors the company's 2016 outlook is based on expectations for a new pricing environment where none of its drugs have an actual price increase of more than 10 percent.

Valeant shares fell 6 percent, or $11.03, to $166.61 on the New York Stock Exchange, while the broader Arca pharmaceutical index was off 0.56 percent <.DRG>.

Concerns about drug pricing have loomed over pharmaceutical stocks since last year and the sector's shares have fallen sharply in the past few weeks since Democratic presidential candidate Hillary Clinton criticized the price rises on the campaign trail.

"The pharmaceutical industry is being aggressively sort of attacked for past pricing actions," Pearson said. "I do think, given that environment, the pricing that pharmaceutical companies will take in the future will be more modest."

VRX Rtrs
The company logo of Valeant Pharmaceuticals International Inc is seen at its headquarters in Laval, Quebec May 19, 2015. REUTERS/Christinne Muschi

Valeant, and others, have been criticized for acquiring companies and raising the prices of drugs in order to boost profits. Federal prosecutors in New York and Massachusetts opened investigations into the company, asking for information about price increases as well as the workings of its patient assistance programs for poor people to access its drugs.

Pearson said the company would begin to focus more on research and development, on which it historically has spent little. Last year the company spent $100 million on R&D and it sees that growing to $400 million to $500 million in 2016.

Pearson said Valeant has begun during the past two years to increase sales volumes as a percentage of growth compared with price increases.

He also said the company is considering selling, spinning off or taking private its neurological and other pharmaceutical business.

While the company continues to look at acquisitions, he said buying back shares may make more sense at current prices.

Valeant reported a better-than-expected quarterly profit, boosted mainly by strong performance in its U.S. dermatology business.

Net income attributable to the company fell to $49.5 million, or 14 cents per share, for the third quarter ended Sept. 30, from $275.4 million, or 81 cents per share, a year earlier.

Cash earnings, or profit adjusted for one-time items, was $2.74 per share, above the average analysts' estimate of $2.70 per share, according to Thomson Reuters I/B/E/S.

 

(Reporting by Caroline Humer in New York and Ankur Banerjee in Bengaluru; Editing by Anil D'Silva and Paul Simao)


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