Valeant Pharmaceuticals (VRX, Financial) fell 9% by mid-afternoon Friday after announcing a new pricing committee that may limit its torrid growth.
The Patient Access and Pricing Committee will decide prices of the company’s drugs. Valeant also acknowledged price gouging that came under scrutiny recently. One of its most vocal detractors, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial)’s Charlie Munger (Trades, Portfolio) called it a “sewer,” and the U.S. Senate summoned its leaders to testify at a hearing on drug corporations’ pricing practices in the past two weeks. A major investor, Bill Ackman (Trades, Portfolio), has unwaveringly defended the company, joining its board last month to help restore its stock, which is down roughly 85% in the past year.
“Valeant has made mistakes in how it priced its drugs in the past, and we are committed to ensuring those mistakes are not repeated,” Joseph Papa, chairman an CEO of Valeant said. “This new committee will take a disciplined approach to reviewing the company’s pricing of drugs, and will consider the impact on patients, doctors, and our health care industry partners. Valeant’s number one priority is ensuring patients can access the medicines they need.”
The committee will be chaired by Joseph Papa, who took over the role of chairman and CEO of the company Tuesday, replacing J. Michael Pearson. The group will comprise doctors, Valeant employees, scientists and executives from other companies. It will begin by reviewing prices of four of its drugs: Nitropress, Isuprel, Cuprimine and Syprine. Only one, heart drug Nitropress, ranks in its top 10 brands, pulling in $219 million in revenue in 2015. Valeant had increased the price of Nitropress 212% after acquiring it. In 2015, it increased the price of all its brand-name drugs by 66%.
The strategy led to tremendous growth. In its financial report for 2015, which included restated figures, Valeant cited $10.5 billion in revenue, up 27% from the previous year. Product sales accounted for $10.3 billion of the company’s revenues in 2015, with just $334.4 million spent on R&D.
Valeant also ended the year with $30.3 billion of debt and $597.3 billion in cash.
Ackman, who boosted his stake to 9% of the company in February, reported a 10.3% gain today for April, narrowing his hedge fund’s decline year to date to 17.5%.
Valeant shares closed at $31.38 Friday, at the low end of its one-year range of $25.27 to $263.81.
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