* Expects price increases of no more than 10 percent
* Plans to increase R&D spending
* Targets neurological division for sale
(Adds Breakingviews link)
By Caroline Humer
Oct 19 (Reuters) - Valeant Pharmaceuticals International Inc (N:VRX)
VRX.TO , which has been criticized for raising drug prices and
is being investigated by the U.S. government, predicted on
Monday that lower price increases are ahead for the whole
industry.
Valeant Chief Executive J. Michael Pearson (L:PSON) told investors
the company's 2016 outlook is based on expectations for a new
pricing environment where none of its drugs have an actual price
increase of more than 10 percent.
Valeant shares fell 7.7 percent, or $13.73, to close at
$163.83 on the New York Stock Exchange.
Concerns about drug pricing have loomed over pharmaceutical
stocks since last year and the sector's shares have fallen
sharply in the past few weeks since Democratic presidential
candidate Hillary Clinton criticized the price rises on the
campaign trail. urn:newsml:reuters.com:*:nL1N12J1MM
"The pharmaceutical industry is being aggressively sort of
attacked for past pricing actions," Pearson said. "I do think,
given that environment, the pricing that pharmaceutical
companies will take in the future will be more modest."
Valeant, which has become one of the world's largest drug
companies through a steady stream of acquisitions, and others
have been criticized for acquiring companies and raising the
prices of drugs in order to boost profits. Federal prosecutors
in New York and Massachusetts opened investigations into the
company, asking for information about price increases as well as
the workings of its patient assistance programs for poor people
to access its drugs. urn:newsml:reuters.com:*:nL3N12F3PM
Pearson said Valeant was unlikely to look for acquisitions
based on what he called mispriced assets, or drugs with prices
that can be significantly increased because of their value to
health care.
"Given the evolution of our product mix, coupled with the
recent events, it is likely that we will pursue fewer, if any,
transactions that are focused on mispriced products," he said.
Valeant is also considering selling, spinning off or taking
private its neurological and other pharmaceutical business, a
move one Wall Street analyst described as paving the way for
Valeant's business model to be less controversial.
The neurological business accounts for most of Valeant's
price actions and realized price increases on average of more
than 30 percent, JP Morgan analyst Chris Schott wrote in a
research note. He estimated it to make up about 10 percent of
the company's revenues.
The move would fit into a strategy that Pearson said has
already been underway. Valeant has begun during the past two
years to increase sales volumes as a percentage of growth
compared with price increases.
"We'll just be pragmatic and why focus on areas of the
business that is just going to create a lot of media stir," he
added, referring to the recent wave of negative publicity over
steep price increases for older medicines.
Pearson said the company would begin to focus more on
research and development, on which it historically has spent
little. Last year the company spent $100 million on R&D and it
sees that growing to $400 million to $500 million in 2016, with
a focus on dermatology, contact lenses and surgical sectors.
Pearson indicated Valeant is scaling back on acquisitions,
saying that while it continues to look at them, buying back
shares may make more sense with the company's stock at its
current price.
Valeant reported unexpectedly better quarterly profits
earlier on Monday.
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BREAKINGVIEWS-Valeant's platform trembles beneath Ackman's feet
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