Valeant CEO says drug price increases will be modest in 2016

Valeant Pharmaceuticals is planning for minimal price increases on its products in 2016 in the wake of two U.S. investigations into its drug pricing practices.

Facing U.S. probe into pricing of drugs, Valeant CEO Michael Pearson says company strategy to shift

Valeant earned $49.5 million, or 14 cents per share in the third quarter, but its stock is down 30 per cent over a U.S. probe into drugs pricing. (CBC) (The Canadian Press)

Valeant Pharmaceuticals is planning for minimal price increases on its products in 2016 in the wake of two U.S. investigations into its drug pricing practices. 

It also plans to shift its strategies in the coming year, spending more on research and development and less on acquisitions of smaller drug makers, CEO Michael Pearson said in a conference call with investors Monday.

Laval, Que.-based Valeant has seen its stock knocked down by 30 per cent since U.S. investigators subpoenaed company officials over price hikes on heart drugs Nitropress and Isuprel.

"The pharmaceutical industry is being aggressively attacked for past pricing actions — not just Valeant, but all companies," Pearson said.

"Given that environment, the pricing that pharmaceutical companies will take in the future will be more modest, and we built that into our forecast for next year," he said, after releasing third quarter results.

CEO defends drug pricing

Pearson mounted a defence of the company's pricing practices, after releasing results showing its revenue rose 36 per cent to $2.79 billion.

He said the company brought in more revenue from the U.S., China, Korea and Mexico, primarily on the strength of its dermatology and contact lense businesses. European markets were flat or lower.

But price increases account for just 15 per cent of the improvement, compared to 19 per cent from increased volume of sales, Pearson said.

But he acknowledged that the scrutiny directed at pharmaceutical companies will mean drugs pricing in future will have to be modest.

"In our pharmaceutical portfolio, we expect low single-digit price increase in 2016 and beyond," he said.

The fury centred on former hedge fund manager Martin Shkreli's Turing Pharmaceuticals for increasing the price of Daraprim, the only treatment approved to treat a life-threatening parasitic infection, to $750 from $13.50 after buying rights to sell the drug.

Though Shkreli backed down on the price, Turing Pharmaceuticals is now facing an antitrust probe by New York Attorney General Eric Schneiderman.

New strategy

Valeant, which has a portfolio of 156 products, has been criticized for buying up small companies and raising the price of their products.

But that may not be its strategy in future.

"It's likely we'll pursue fewer if any transactions that are focused on mispriced products," Pearson said.

Valeant has seen good results from investments in research in dermatology products and intends to build on that research strategy in coming years, he said.

It also may sell off its underperforming neurology unit.

And if its share price remains at its current low level, it could decide to buy back shares in the coming quarter, Pearson said.

Valeant earned $49.5 million, or 14 cents per share in the third quarter. Earnings adjusted for one-time gains and costs were $2.74 per share, much better than the $2.68 projected by analysts.

For the full-year, the company raised profit guidance to between $11.67 and $11.87 per share from $11.50 to $11.80 per share. It boosted its revenue outlook to between $11 billion and $11.2 billion from $10.7 billion to $11.1 billion.