* Generics cut into sales of Wellbutrin antidepressant
* U.S. Medicare reform held back sales
* Company offers weak third-quarter outlook
* Shares fall 18 pct after 78 pct increase this year
(Adds comments, details; In U.S. dollars unless noted.
Corrects typo in 5th paragraph)
By S. John Tilak
TORONTO, Aug 4 Valeant Pharmaceuticals
International Inc (VRX.TO)(VRX.N) said new generic rivals cut
into sales for one of its top drugs, overshadowing a sharp rise
in quarterly earnings and sending its shares down 18 percent.
Sales of Wellbutrin XL, an antidepressant that accounted
for about 7 percent of revenue in the second quarter, would
likely keep falling, Valeant said.
The company, one of the most acquisitive in healthcare,
sees difficulties ahead in the United States, one of its main
"There were no major red flags, just some yellow flags like
the pace of the decline of Wellbutrin," said Susquehanna
Financial analyst Gary Nachman, who termed the quarter as
"neither good, nor horrible". "The extent of the sell-off was a
The stock had risen 78 percent since the start of the year,
lifted by a string of acquisitions and Valeant's consistent
record of topping estimates and raising its forecasts.
Thursday's decline wiped out nearly $2.8 billion of
Valeant's $15.5 billion market capitalization.
"The share price fall suggests something is fundamentally
broken, but that's not the case," Canaccord Genuity analyst
Neil Maruoka said. "The stock was priced to perfection."
The company reported its results on a day when stock
markets around the world dived on concerns about the health of
the global economy.
"Investors were surprised by the level of competition they
faced in neurology," Morningstar analyst David Krempa said.
"Wellbutrin has already been losing market share and they've
just been trying to hold steady."
Valeant's second-quarter net earnings rose to $56 million,
or 17 cents a share, from $34 million, or 21 cents, a year
earlier. The per-share figure dropped as the number of shares
Cash earnings were 73 cents a share, including an
extraordinary gain of 6 cents a share. Revenue was $609
Cash earnings per share is arrived at using the cash flow
instead of the net income.
The company sees third-quarter earnings of 55 cents to 60
cents a share, implying that Valeant will have a lot of work to
do in the fourth quarter to meet 2011 targets, Nachman said.
Analysts on average were expecting 69 cents a share.
Shares of Valeant dropped 15 percent at C$42.69 on the
Toronto Stock Exchange and were down 16 percent at $43.77 on
the New York Stock Exchange by Thursday mid-afternoon.
Valeant President Rajiv De Silva said on a conference call
with analysts that U.S. Medicare reform held back
second-quarter sales and the company would face more headwinds
in the United States in the second half of the year.
The company still raised its earnings forecast for the year
by 5 cents a share and said it expects to meet its annual
revenue growth target of 8 percent, excluding new
Last month, media reports said Valeant had approached
Swedish specialty drug maker Meda AB MEDAa.ST about a
Valeant dropped a $5.7 billion bid for U.S. drugmaker
Cephalon Inc CEPH.O in May. Chief Executive Michael Pearson
told Reuters last month it was seeking acquisition targets.
(Reporting by S. John Tilak, editing by Gerald E. McCormick,
Lisa Von Ahn and Peter Galloway)