One Reason Why Valeant (VRX) Stock Is Plummeting Today

Valeant (VRX) stock is down following Warren Buffett's comments at Berkshire Hathaway's (BRK.A, BRK.B) annual meeting this weekend.

Author:: Rachel Graf
Publish date:: May 2, 2016 12:23 PM EDT

NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) stock is plunging by 7.04% to $31.01 in early-afternoon trading on Monday, after billionaire Warren Buffett criticized the pharmaceutical company's business at Berkshire Hathaway's (BRK.A, BRK.B) annual meeting this weekend.

Last week, outgoing CEO Michael Pearson admitted at a Senate hearing on drug pricing practices that Valeant made mistakes and he and the company were too aggressive.

Valeant's business strategy is "enormously flawed," and last week's Senate hearings were "not a pretty picture," Berkshire's chairman Buffett said at the annual meeting, according to Bloomberg.

Buffett's deputy Charles Munger also spoke negatively about Valeant.

"Valeant of course is a sewer, and those who created it deserve all the opprobrium that they got," Munger said at Berkshire's annual meeting, Bloombeg adds. Munger elaborated on CNBC this morning that behavior at Valeant was "evil" and "demented."

Additionally, Valeant filed its 10-K last week and consequently avoided a default, but the company must still contend with several investigations, high inventory levels in Russia and Poland and "auditor's language related to material weakness in internal controls over financial reporting which in our view should have been expected," RBC Capital wrote in a note, Barron's reports.

There could be risk to current guidance due to management changes and recent TRx trends, the firm added.

Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.

Valeant's weaknesses include its deteriorating net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

You can view the full analysis from the report here: VRX

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.