TRLPC: Valeant's falling secondary loan price pulls pharma companies down

Thu Oct 22, 2015 3:07pm EDT
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By Lisa Lee

NEW YORK Oct 22 (Reuters) - US secondary loan prices for pharmaceutical companies are falling with slumping equity levels as growing political and regulatory pressure on drug pricing threatens the growth model that underpins lending to the sector.

Valeant Pharmaceutical Inc's secondary loan price on its D, E and F term loans fell in volatile trading on Wednesday and continued to fall to 92.25-92.75% of face value on Thursday, according to traders.

Its share price also saw a second day of declines after influential short-seller Citron Research said that the drugmaker had used specialty pharmacies to create 'phantom sales'.

Valeant refuted the claims in the report, which also highlighted risks in Valeant's business model based on rapid expansion driven by acquisitions and aggressive price hikes.

Around US$17bn of Valeant's market value has been wiped out since Tuesday, Reuters reported. Its loans were trading at 97.75-98.75 on Tuesday before the report, down from 99.5-100 in late September.

Valeant's problems have pulled trading levels lower on a range of pharmaceutical loans, including Concordia Healthcare's US$1.865bn-equivalent loan, which broke in trading earlier this week.

The term loans of drug companies Endo International and Mallinckrodt were also pulled lower.

Concordia's loans were heavily discounted after a difficult primary syndication to compete with falling secondary prices which offered better relative value.   Continued...