Valeant stated that all shipments to Philidor and other pharmacies in the Philidor pharmacy network, including R&O, are not recorded in Valeant’s consolidated net revenue.
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On a conference call Monday, Valeant said inventory held by Philidor is on Valeant’s books, and the company doesn’t recognise revenue until prescriptions are filled.
The Citron Research report followed reports by the New York Times and the Southern Investigative Reporting Foundation that looked at Philidor and R&O Pharmacy, two US specialty pharmaceutical companies Valeant works with.
Citron Research, a short-selling firm run by Andrew Left, alleged that Valeant’s previously undisclosed ties to specialty pharmacies – including Philidor and R&O Pharmacy Inc – helped the company create “phantom sales” of its products or push more product through distribution channels than sales would warrant.
The storm triggered by the report has forced the pharmaceutical giant to issue a statement refuting the allegations, calling them “erroneous”.
This was not sufficient to limit the damage.
Shares of Valeant Pharmaceuticals Intl (NYSE:VRX) traded down 19.346% on Thursday, hitting $95.664.
The Citron report published Wednesday names several pharmacies, including R&O Pharmacy, that share a phone number with Philidor and have similar text on their websites.
Investors are asking how Valeant is connected to a whole host of smaller companies right now.
With the additional purchase, Ackman’s Pershing Square Capital Management is now Valeant’s second-largest shareholder after Ruane, Cunniff & Goldfarb’s Sequoia Fund. The Wednesday decline wiped approximately $500 million from Ackman’s bottom line and brought losses on his Valeant position to about $1.4 billion before today’s drop, according to Reuters.
Shares of Valeant Pharmaceuticals global (VRX) plunged again Thursday as a unit of the Canada-based drugmaker added new information to financial allegations besieging the company. Philidor said it provided Web and call services for R&O, and it maintains an option to acquire the company.
What’s more, the government has been scrutinizing Valeant harder than any other big drug company because it spends so little on R&D.
Analyst Dimitry Khmelnitsky sees Valeant at risk of losing its “secret sauce” that made it a darling of many investors due to the pullback in its share price. The stock is now down about 54 percent from its August high.
A spokesperson for Valeant refused to comment on the story.
Citron said it appears “that Valeant/Philidor have created an entire network of phantom captive pharmacies” to create fake sales of drugs or to avoid scrutiny from auditors. It lost about US$9.6 billion in market capitalisation.
In other news, CFO Robert L. Rosiello acquired 7,875 shares of Valeant Pharmaceuticals Intl stock in a transaction dated Friday, July 31st.
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“Given the ongoing attacks on Valeant, we believe that few investors would be willing to step in front of this stock”, he said. The report fanned concerns about Valeant’s accounting, raising questions about its use of certain pharmacies to supply its drugs and its accounting for the dispensing.
