On Monday, Canada-based Valeant Pharmaceuticals International Inc’s stock prices sank 16.5 percent after a U.S. House of Representatives’ committee unveiled plans to subpoena the drug maker and investigate the 212% and 525% increases in the price of two heart drugs shortly after the company bought them early this year.
The plans to subpoena the company were the work of 18 Democratic members of the House panel. And the announcement sent shock waves through the entire drug market since shareholders are worried that the government and insurers may tighten rules on drug prices.
Additionally, shares of nearly all major drug makers slid last week after Hillary Clinton announced some measures that would prevent drug makers from artificially hiking old drugs’ prices.
But the loss also affected Pershing Square Capital Management, a hedge fund managed by Bill Ackman who owns 5.7 percent of Valeant. Nasdaq biotech index was also hit with a 6 percent loss, while AbbVie and Gilead Sciences had the highest losses.
The 18 Democrats who eyed Valeant also urged the committee’s chairman to call the company’s chief executive Michael Pearson to testify next week. Last week, another drug maker’s CEO and former hedge fund manager Martin Shkreli was summoned to appear before the commission.
Pearson told reporters Monday that he hadn’t read the committee’s letter yet. He promised to have a look at it.
Shkreli’s Turing Pharmaceuticals made headlines last week when its founder and CEO decided to hike price for an old drug that cures dangerous complications of AIDS and cancer patients by nearly 5,000%. Daraprim whose initial price was $13.50 per tablet saw its price jump to $750 per tablet overnight after Turing bought it.
The price hike sparked public outrage so Shkreli, 32, also known as the ‘Pharma bro,’ said he would lower the price but wasn’t very specific on by how much. Clinton urged the CEO to roll it back to its initial price. Next week, Shkreli may also testify before Congress.
“It just makes people more nervous that you are going to see Michael Pearson sitting next to Martin Shkreli,”
noted Umer Raffat of the Evercore ISI.
Pearson also built his pharmaceutical empire on price hikes, research and portfolio cuts, and a series of mergers. Valeant couldn’t be reached for comment.
But pharma stock prices have been sinking since mid-summer, and analysts believe that is because the stocks were overvalued. Plus, another reason may be the trades in exchange traded funds, other analysts said.
Image Source: Marketing Mag
Latest posts by Nathan Fortin (see all)
- The End of Life Option Act Already Used by 111 People - Jul 15, 2020
- Senate Decided to Kill Rule that Promotes Retirement Plans - Jul 15, 2020
- BlackRock Is Turning to Robots for Improved Stocks - Jul 15, 2020