Valeant Pharmaceuticals International Inc. (NYSE: VRX) on Tuesday said its internal review of how it accounted for revenue through mail-order pharmacy Philidor RX Services LLC is complete and that it didn't find any additional problems requiring restatement. For last several months, its price crashed from highest $260 to lowest $26, the problem from one of its pipelines, Philidor make it so serious that investors are escaping without a right valuation concern.
Shares rose 8.8% to $28.41 in early afternoon trading Tuesday.
The Canadian drug company plans to include the restated financials in its 10-K, which the firm reiterated is on schedule to file by April 29, though it has asked lenders for more time to avoid triggering a potential default.
Valeant said it would dissolve the review committee, transferring oversight back to the board and its audit and risk committee.
Last month, Valeant confirmed it would have to restate past earnings because it had recognized a chunk of revenue too soon. It also suggested it had effectively counted some revenue twice.
The main accounting issue dogging Valeant is how it accounted for revenue through Philidor, with which it had close ties. If the ties were as close as they proved to be, revenue shouldn’t have been counted until drugs reached the patient, not when Valeant delivered the drugs to Philidor, the company acknowledged and accountants have said.
Valeant had said in February it should have waited to recognize $58 million in revenue through Philidor, which it said it wrongly booked upon delivery to Philidor rather than dispensation to customers. Much of that amount should have been booked in 2015 rather than 2014, Valeant said.
The company did switch in December 2014 to waiting longer, once it had acquired an option to buy Philidor and started consolidating the pharmacy’s finances as part of its own.
Last month, Valeant moved to replace longtime Chief Executive Michael Pearson, part of a series of steps to regain credibility and show investors it is committed to a fresh start after months of failed attempts. The company is also seeking the resignation of board member and former Chief Financial Officer Howard Schiller, who signed off on the earnings statements Valeant is now withdrawing. Mr. Schiller has fired back and hired lawyers, denying the “improper conduct” of which the company accused him and declining to step down.
But even as it pointed the finger at two individuals, Valeant has said its accounting problems were rooted in broader cultural issues.
Valeant also has handed a board seat to activist investor William Ackman, whose hedge fund has been hurt by its 9% ownership of Valeant shares as they lost almost 90% from their August high.