TORONTO (CP) — Canada’s largest stock market weakened as shares in Valeant Pharmaceuticals, one of Canada’s most valuable companies, fell by 5.4 per cent after the company said it had been subpoenaed by U.S. federal prosecutors.
The Toronto Stock Exchange’s S&P/TSX composite index ended the day down 46.36 points at 13,828.97.
Valeant was already in the crosshairs of U.S. politicians concerned about rising drug costs even before the company’s late Wednesday announcement that it is under scrutiny by U.S. federal prosecutors in two states.
Canada’s largest drugmaker said the U.S. Attorney’s offices in Massachusetts and New York had issued subpoeanas seeking information on its drug pricing, distribution and patient assistance program.
Valeant (TSX:VRX) ended trading down $12.35, or 5.4 per cent, at $216.73 on the Toronto Stock Exchange.
The health care subsector was the biggest loser on the Toronto market, declining 1.6 per cent as Concordia Healthcare, one of Valeant’s smaller rivals, fell 7.4 per cent.
John Stephenson, president and CEO of Stephenson and Co. Capital Management, said Valeant had gained market share in part through aggressive acquisitions and had funded its growth by raising the prices for its drugs.
Drawing the attention of government and regulators makes it harder for the company to continue on that path, he said.
“It’s clear the bloom is off the rose because this game, if you will, has run out of time,” he said.
In New York, markets gained ground after positive news on jobless claims.
The U.S. Labor Department said Thursday that the number of Americans seeking unemployment aid fell last week, matching the lowest level in 42 years.
The Dow Jones average of 30 stocks closed up 217 points at 17,141.75, the broader S&P 500 index advanced 29.62 points to 2,023.86 and the Nasdaq index gained 87.25 points to 4,870.10.
Stephenson said that despite the positive job numbers, recent indicators have shown a faltering American economy and make it less likely that the U.S. Federal Reserve will raise interest rates before the end of the year.
“The fact that things look like the Fed may be on hold for some time is ultimately promising for markets,” he said.
In the upside-down world of Wall Street, tepid growth in the American economy is a positive because the Fed won’t risk raising interest rates. Historically low rates near zero have been credited with helping provide the liquidity that has driven markets since the Great Recession.
On the commodity markets, the December gold contract rose $7.70 to settle at US$1,187.50 an ounce, the November crude oil contract fell 26 cents to US$46.38 a barrel and the November contract for natural gas fell 6.5 cents to US$2.453 per thousand cubic feet.
The loonie ended the day up 0.45 of a U.S. cent at 77.57 cents US after gaining more than half a cent on Wednesday.
Stephenson said the Canadian dollar stands to benefit as America’s central bank seems poised to push its first interest rate rise since the 2008 recession further into the future.
Peter Henderson, The Canadian Press
