Valeant Pharmaceuticals reports disappointing results, cuts guidance; oil jumps over $50, sector firms

By Stephanie N. Rotondo

Seattle, June 7 – Valeant Pharmaceuticals International Inc. was “one of the more notable names” in the distressed debt market on Tuesday, according to a trader.

The notoriety of the name – and its debt – came as the troubled drug maker released disappointing earnings and also lowered its guidance.

Away from Valeant, a trader said that “a lot of the oil and gas stuff continues to be better.”

Chesapeake Energy Corp.’s 8% second-lien notes due 2022, for instance, were “higher again,” the trader said, placing the issue in an 84½ to 85 context.

Another trader said the bonds were “up again,” trading up 1½ points to 84¾.

Yet another market source pegged the 6 5/8% notes due 2020 at 73¾ bid, a gain of 2½ points.

California Resources Corp.’s 8% second-lien notes due 2022 were also firm, adding a deuce to close at 75¼, according to one trader.

Even Seventy Seven Energy Inc. – an Oklahoma City-based oilfield services provider spun off from Chesapeake in 2014 – managed to hold steady, even as the company filed for bankruptcy.

One trader said the 6 5/8% notes due 2019 were “unchanged on the day” at 46. Another trader placed the issue in the mid-40s.

The bonds are now trading flat, or without accrued interest, given the filing.

Under the prepackaged filing, the company will convert $1.1 billion of its $1.8 billion in debt into new equity. The existing equity will be canceled.

The energy space continued to benefit from gains in crude oil. For its part, domestic crude popped above the $50-mark for the first time in almost a year, as the market worried about supply outages in Nigeria and pondered a U.S. inventory draw down.

Valeant numbers disappoint

Valeant Pharmaceuticals’ bonds traded off Tuesday as the market reacted poorly to the company’s latest earnings release.

“They had bad numbers,” a trader said. “The bonds are all down.”

However, he noted that the debt “came back” from the day’s lows.

He said the 6 1/8% notes due 2025 – the most active of the company’s various issues – ended off almost a point at 82. The 5 7/8% notes due 2023, as well as the 5 3/8% notes due 2020, dropped a point to 82½ and 87, respectively.

Another trader called the 6 1/8% notes “down about a point” at 81½.

For its first fiscal quarter, the Canadian company posted a loss of $373.7 million, or $1.08 per share. That compared to a profit of $97.7 million, or 29 cents a share, the year before.

On an adjusted basis, EPS was $1.27, down from $2.05.

Revenue improved 9.3% to $2.37 billion. The company attributed the rise to last year’s acquisitions. But certain key products did not perform as well as expected, such as Xifaxan, an irritable bowel drug. Sales of that product for the quarter came to $208 million, barely up from the $205 million sold last year.

The company’s skin drugs were also not faring well, as sales declined 43% to $228.6 million.

In addition to – finally – reporting its quarterly results, Valeant also cut its annual forecast – for the second time since December.

For the full year, the company is projecting EPS of $6.60 to $7.00, down from March’s guidance of $8.50 to $9.50. Revenue is expected to be between $9.9 billion and $10.1 billion, down from previous expectations of $11 billion to $12 billion.

Adjusted EBITDA forecasts were cut to $4.8 billion to $4.95 billion. Valeant initially said in December that the key measure would come in between $6.9 billion and $7.1 billion, then downwardly revised those figures to $5.6 billion to $5.8 billion in March.

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