Valeant says it will exceed debt repayment target, shares surge

(Reuters) - Canada’s Valeant Pharmaceuticals International Inc said on Tuesday it expects to repay more than $5 billion in debt earlier than it had targeted, news that pushed its shares up 9 percent.

FILE PHOTO: A sign for the headquarters of Valeant Pharmaceuticals International Inc is seen in Laval, Quebec June 14, 2016. REUTERS/Christinne Muschi/File Photo

The company also posted better-than-expected second quarter results, citing organic growth at its Bausch + Lomb and Salix businesses.

Since taking the helm in April 2016, Chief Executive Joseph Papa has been trying to rebuild the company’s business and regain investor confidence following a flurry of investigations into its accounting and pricing practices.

One of Papa’s biggest challenges has been to cut the company’s towering debt, which ballooned to nearly $30 billion following a spate of deal-making under former CEO Mike Pearson.

The company said on Tuesday it was continuing to reduce debt and resolve legacy issues, and that it expected to exceed its pledge to reduce $5 billion in debt before February 2018. That would leave the company with no significant debt maturities until 2020.

“That would allow us to have additional flexibility for the future,” Papa said in an interview.

“We now have a time period for the next two, two and a half years to make sure that we grow our business, invest in our business, and grow EBITDA to allow us to pay down additional debt.”

He pointed to money spent creating a new sales team for gastrointestinal products that helped increase sales of Valeant’s drug for irritable bowel syndrome, Xifaxan.

Valeant had long-term debt of about $28.5 billion as of June 30.

The drugmaker has been paying down its debt by selling off assets including cancer treatment unit Dendreon Pharmaceuticals, Obagi Medical Products and iNova Pharmaceuticals.

Valeant said it earned $1.05 per share excluding items, coming in ahead of the average analyst estimate of 94 cents, according to Thomson Reuters I/B/E/S. Strong Xifaxan sales helped the results.

Revenue of $2.23 billion was roughly in line with expectations.

It lowered its revenue forecast for the year to $8.70 billion to $8.90 billion, compared with its previous forecast of $8.90 billion to $9.10 billion. However, it maintained its 2017 forecast for adjusted earnings before interest, tax, depreciation and amortization.

On Monday, the FDA declined to approve Valeant’s eye drop for the second time in a little over a year, raising concerns over Bausch + Lomb’s manufacturing facility in Tampa, Florida.

U.S.-listed shares of the Laval, Quebec-based company were up $1.40, or 9.1 percent, at $16.77 in morning trading on Tuesday.

Reporting by Natalie Grover in Bengaluru and Michael Erman in New York; Editing by Saumyadeb Chakrabarty and Frances Kerry