50+ Valeant sales reps may have jumped to Synergy Pharma
Shares of embattled Valeant Pharmaceuticals (VRX) continue to decline this morning following Wells Fargo analysts delivering an underperform rating to the Canada-based pharmaceuticals company on Feb. 23.
Part of the issue could be a mass exodus of sales people attached to Valeant’s gastrointestinal line, according to a Barron’s blog that cited David Maris of Wells Fargo. According to the source, approximately 50 Valeant sales people left en masse to join Synergy (SGYP) after the U.S. Food and Drug Administration approved that company’s new drug, Trulance, for the treatment of adults with chronic idiopathic constipation. Trulance (plecanatide) is the first drug designed to ” replicate the function of uroguanylin, a naturally occurring and endogenous human gastrointestinal (GI) peptide that is thought to stimulate fluid secretion which results in a stool consistency associated with more regular bowel function,” according to Synergy.
The FDA approval came days before Synergy announced pricing of an offering of 20 million shares of common stock. The proceeds of the stock sale are expected to fund commercialization of Trulance, as well as fund additional clinical development of Trulance.
Valeant confirmed that some sales people had left the company, but would not confirm if there were more than 50 or if those employees left to join Synergy. Valeant told Maris that it was common for pharmaceutical sales reps to move to other companies following the approval of a new drug, Barrons said in its report.
Maris, Barrons reported, said that if it’s true Valeant lost more than 50 GI-focused sales people, it would signal another setback for that beleaguered company, which has seen a “weakness” in its GI franchise. Valeant’s biggest revenue source in its GI pipeline is Xifaxan, which is used to treat irritable bowel syndrome. Valeant acquired Xifaxan when the company acquired North Carolina-based Salix Pharmaceuticals (SLXP). There was anticipation among some analysts that the drug could become a blockbuster, but last year Valeant shifted its strategy around the product, which caused the company to decrease revenue predictions for 2016.
“Xifaxan has delivered strong growth, but it is less than our expectations, and we believe the potential. Disruption, sales force turnover, changes in leadership, shifts in strategy, and increase in enrollments in high deductible plans, which we believe for the first time extended into the second quarter have contributed to our lower forecast,” Robert Rosiello, Valeant’s chief financial officer said in June during an investor call.
During a conference call with investors in June, Valeant Chief Executive Officer Joseph Papa said the company’s Salix line was “running below original expectations.”
Valeant has been in turmoil for nearly two years as it’s seen a tremendous loss in market share. The company has been discussing selling off core assets in order to meet debt obligations.