Valeant shares drop after CEO subpoenaed by U.S. Congress
The head office and logo of Valeant Pharmaceutical are pictured in Montreal on Monday, May 27, 2013. (Ryan Remiorz / The Canadian Press)
Linda A. Johnson, The Associated Press
Published Monday, March 28, 2016 2:05PM EDT
Last Updated Monday, March 28, 2016 3:40PM EDT
TRENTON, N.J. -- Shares of beleaguered Canadian drugmaker Valeant Pharmaceuticals plunged again Monday after its CEO was subpoenaed by a congressional committee.
The Senate Aging Committee said in a statement that J. Michael Pearson, Valeant's CEO since September 2010, is among the witnesses expected to testify on April 27.
The committee is holding its third hearing since December on soaring prices for prescription medicines, which are becoming unaffordable for many patients.
The high prices for many drugs -- some costing $100,000 or more for a course of treatment -- also are straining the budgets of insurers and government health programs. The most expensive drugs are generally ones for cancer and rare diseases, but the trend includes many brand-name drugs that have had hefty price hikes year after year, as well as old drugs with limited competition.
Executives at Valeant Pharmaceuticals International Inc., Turing Pharmaceuticals and several other drugmakers have been buying up rights to those old drugs and then jacking up prices many times over what they had cost. Executives of the companies have been invited or subpoenaed to testify at hearings on the issue held by multiple Congressional committees.
Valeant is in crisis, with three ongoing federal probes into its accounting and business practices, insurers demanding bigger discounts from its inflated list prices for many of its drugs and executives leaving. Activist investor Bill Ackman's Pershing Square Capital Management, one of Valeant's largest shareholders, just took over two positions on its board of directors to try to salvage the fund's investment in Valeant.
The company, based in Laval, Quebec, has repeatedly delayed filing its fourth-quarter and full-year 2015 results while a committee it appointed investigates accounting practices that resulted in the company prematurely reporting sales in late 2014 made to Valeant's former partner, the now-defunct mail-order pharmacy Philidor. Those delays put Valeant in danger of defaulting on agreements with its creditors and bondholders that require the company to file its annual financial report with the U.S. Securities and Exchange commission this month.
Shares of Valeant Pharmaceuticals International Inc. fell 6.4 per cent Monday afternoon, to $29.09.
Valeant shares have fallen steadily from a high of $263.81 last August, as its prices and accounting practices came under scrutiny. The company grew rapidly in the last several years with a spree of acquisitions, which pushed its debt to about $30 billion. Now Valeant says it will stick to modest or no price increases, which upends its business strategy, and it's in talks to sell noncore assets to pay down some of its debt.
The company announced last week that Pearson, who recently returned from a two-month medical leave, would depart the company as soon as a replacement was found. Neither Pearson nor Valeant has said whether he's resigned or been fired.