Philidor is a regional pharmacy based in Pennsylvania.
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The latest data indicates that short interest positions in Valeant’s stock in the USA market have more than doubled since mid-August, jumping to 7.1 million shares at the end of September, about 2 percent of the company’s outstanding float.
The declines have chopped $16 billion from the company’s market capitalization in the past two days.
The stock fell 13 percent to $102.83 at 12:49 p.m.in New York, after dropping 19 percent on Wednesday.
The participants on the call include CEO Michael Pearson, general counsel Robert Chai-Onn, CFO Rober Rosiello, and a number of board members and risk committee members. All sales to Philidor and Philidor network pharmacies are accounted for as intercompany sales and are eliminated in consolidation. Standard & Poor’s also said it is sticking by its ratings on Valeant, saying speculation about potential fraud was unfounded. He said Philidor appeared to be under Valeant’s control, whereas other drugmakers consider their affiliated specialty pharmacies fully independent.
Valeant has built its business model on buying smaller drug companies and putting up the price of their products. Besides the Citron issue, Valeant has other concerns, including government investigations into its drug pricing practice and an uncertain future if it doesn’t continue raising drug prices. The company is also incorporated in the western Canadian province of British Columbia.
Valeant’s supporters have so far stuck by it, though; on Wednesday, one-time deal partner and enthusiast investor Bill Ackman said he’d nabbed an additional 2 million shares in the company, telling CNBC he believes in Valeant despite the Citron allegations.
Over the years, Valeant Pharmaceuticals has been under scrutiny for extreme drug price hikes it has acquired, which included several probes carried out by New York and Massachusetts federal prosecutors.
Valeant said the Citron report allegations were erroneous. “There is no sales benefit from any inventory held at these specialty pharmacies”, the company said, adding that, “Sales are recorded only when the product is dispensed to the patient”. A report from Citron Research claims that the company is basically selling inventory to itself and calling it revenue.
In Valeant’s case, the structure involved its relationship with two companies mentioned in Citron’s report – Philidor and R&O Pharmacy.
Working with an in-house specialty pharmacy lets a drugmaker make higher profit margins and keep patients on its drugs longer, said David Galardi, co-founder of closely-held Apogenics Inc., a pharmacy consultant. The stock was last down 14% on Thursday at about $102.
The company has not yet responded to the accusations, but said it would have a news release later in the day.
The Philidor and R&O connections were also examined by Bronte Capital, another hedge fund that, like Citron, has been critical of Valeant.
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In the Dow, gains in shares of United Technologies and those of Travelers, last up 3.1 percent and 2 percent respectively, outweighed slides in shares of UnitedHealth and those of Pfizer, last down 3.8 percent and 2.6 percent respectively.
