Short sellers claim Valeant is using Philidor to generate “phantom sales” – claims Valeant has denied.
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Andrew Left, the short seller who unleashed the storm around Valeant Pharmaceuticals worldwide Inc., is quick to swat away all the good things billionaire William Ackman has to say about the stricken drug company. The move comes a day after CVS Health and Express Scripts, the nation’s two largest pharmacy benefit managers, said they would stop working with Philidor. Valeant has severed ties with Philidor but its association with the specialty pharmacy has already hurt the company’s reputation, according to the ratings agency. Federal prosecutors have subpoenaed documents tied to its drug pricing and other policies.
Valeant Pharmaceuticals worldwide (VRX) suffered another blow to its debt-driven roll-up strategy late Friday when Standard & Poor’s downgraded its debt to B-plus from double-B-minus.
The Philidor and R&O connections were also examined by Bronte Capital, another hedge fund that, like Citron, has been critical of Valeant.
He also confirmed that the company recently purchased 2.1 million Valeant shares.
Philidor represented 6.8 per cent of Valeant’s revenue in the third quarter, including large quantities of its toenail fungus medication Jublia.
In a call with investors Monday, the company defended its accounting while saying it was establishing a board committee to review questions about its relationship with Philidor. Apparently, despite all the arguments Valeant is now making in its own defense, the unethical participation of Philidor in its business is rather clear. CVS confirmed it was terminating Philidor from the network of its Caremark pharmacy-benefit unit, after audits found the pharmacy was not complying with terms of its accord.
Specialty pharmacies like Valeant and Horizon used to make their money handling complex, expensive drugs that treated serious conditions, like multiple sclerosis.
Steven Kaplan, a finance professor at the University of Chicago, said it’s far from clear that Ackman’s Valeant gambit will work out for his investors.
A few investors spent their entire morning on the phone with hedge fund manager Bill Ackman, as he defended his investment in Valeant Pharmaceuticals. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company’s most recent annual or quarterly report and detailed from time to time in Valeant’s other filings with the Securities and Exchange Commission and the Canadian Securities Administrators, which factors are incorporated herein by reference. For years, doctors and insurers have condemned the rising cost of prescription drugs.
The Wall Street Journal reported this week that Philidor asked its staff to use “back door” tactics to ensure payment.
The stock market drifted lower Friday but finished October with its biggest monthly gain in four years.
“Some of the best regarded drug companies are repeat offenders”, said Ackman, listing 20 that have paid a total of $30 billion in fines since 1991.
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The scandal has sent Valeant’s share price tumbling 60 percent in three months.
