What: After reporting first-quarter financial results and lowering its full year forecast, shares in Valeant Pharmaceuticals (NYSE:BHC) are tumbling 12.9% at 12:30 p.m. EDT today.

VRX Chart

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So what: The embattled drug-maker is attempting to repair its damaged reputation with investors, but today's first-quarter earnings results failed to excite investors or spark a rally.

Valeant's new CEO Joseph Papa reports that first-quarter results were negatively impacted by its new distribution agreement with Walgreens Boots Alliance, Inc. (NASDAQ:WBA), the nation's largest pharmacy chain.

Image source: Walgreens Boots Alliance.

Papa's predecessor, Michael Pearson, inked a 20-year distribution agreement with Walgreen's in December after the company was forced to shut down the use of its specialty pharmacy, Philidor, over mounting scrutiny of improper practices.

So far, the Walgreen's relationship isn't going smoothly. Last quarter, Valeant reports that problems associated with filling scripts and obtaining reimbursement at favorable prices led to some scripts being filled at a loss. That problem appears to have particularly impacted sales of Valeant's dermatology drugs, which represent more than 20% of the company's total sales. 

Turning a profit on drugs sold through Walgreens is paramount, but Valeant Pharmaceuticals is still working on implementing a solution, and until it does, investors are left wondering how much of a drag on sales and profit it will have this year.

Based on Valeant's newly issued guidance, it appears the impact will be significant. The company now expects full-year sales of between $9.9 billion and $10.1 billion, which is a huge haircut from its March forecast of between $11 billion and $11.2 billion (that forecast was already a big reduction from the $12.5 billion expected in December). Valeant also lowered its non-GAAP EPS estimate for the year to at least $6.60 from at least $8.50, and it didn't offer up any forecast on a GAAP accounting basis.

Now what: Valeant appetite for M&A saddled it with a massive debt load, and given the ongoing cuts to guidance, the company appears to be getting closer to violating covenants that could cause a cash crunch. Assuming Papa and his team can get the Walgreen's deal on track, Valeant should stay above the critical levels necessary to avoid breaching its covenants, but it's still one more worry investors have to deal with.

VRX Total Long Term Debt (Annual) Chart

VRX Total Long Term Debt (Annual) data by YCharts.

Overall, Valeant's quarter appears to be more of the same, rather than the beginning of a new era. Until Valeant can start over-delivering on expectations, investors are probably best off focusing on other investment opportunities instead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.