Valeant Restatement Looks ‘Largely Contained,’ Says JPMorgan

JPMorgan analyst Chris Schott says that based on last night’s Wall Street Journal article, Valeant Pharmaceuticals’ (VRX) upcoming restatement appears “largely contained” to legacy Philidor accounting. As such, the analyst sees limited to no implications to future Valeant results.

If confirmed by Valeant, the actual restatement would be confined to a small portion of the company’s 2014/2015 results, Schott told investors last night in a research note following the Journal’s story.

Valeant late last night announced that it has preliminarily identified certain sales to Philidor during 2014, prior to Valeant’s entry into an option to acquire Philidor, that should have been recognized when product was dispensed to patients rather than on delivery to Philidor. The company believes that approximately $58M of net revenues previously recognized in the second half of 2014 should not have been recognized upon delivery of product to Philidor.

Correcting the misstatements is expected to reduce reported 2014 GAAP earnings per share by approximately 10c and increase 2015 GAAP EPS by approximately 9c, it stated.

Shares of Valeant closed yesterday down $9.08 to $75.91 but traded up $1.59 to $77.50 in the after-hours. Schott has an Overweight rating on the shares with a $200 price target.