Monday, May 9, 2016

Special Committee on Aging Frontruns Valeant Q1 Earnings Release

Entangled within the epic data dump the Senate Committee on Aging gave the world there is some troubling guidance provided by Valeant's CFO, Rob Rosiello. In response to the interrogatories posed by the committee regarding the pricing of a handful of Valeant drugs, Mr. Rosiello (response starts on pg 17) was required to disclose the ratio of revenues that each of those drugs represented in relation to company wide numbers. To set the baseline for those ratios, Mr. Rosiello provided the following table (pg. 21) of his response that details financial information for the company:

  • i. Net Product Sales
  • j. COGS
  • k. Gross Margin
  • l. Net Income

There are a couple of very interesting aspects of this disclosure.

  1. It allows you to look back to see how previously disclosed margins, COGS and revenues compare, pre- vs. post- restatement (fun times)
  2. More interestingly, it gives you a direct line of sight on what Q1 2016 will look like.
Valeant just reaffirmed guidance today at $1.30-$1.55 EPS with revenue estimates of $2.3-$2.4B.
We know from Rosiello's sworn testimony provided in his response to the interrogatories that Valeant had $1260.95M in net product sales through February. To meet today's guidance, Valeant will have to net $1039.05M in sales in March (a 50.7% increase m/m versus February and a 81.9% increase m/m versus January), translating to approximately ~$260M in Net Income.

If Valeant doesn't manage to squeeze two month of revenues into March (which was perhaps the most tumultuous month in their entire history), they'll miss their own numbers they reaffirmed today. 

Supposedly, we'll find out by June 10th.