Valeant announced today that it would host a conference call Monday to address the allegations made by Citron.
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Nonetheless, “there’s confusion in the market”, Kass says, referring to Valeant stock opening Wednesday at $148 and dropping to $88 before climbing back to $120 in mid-afternoon as Valeant refuted Citron’s claim.
Any inventory at pharmacies in the Philidor pharmacy network are included in Valeant’s consolidated inventory balances – there is no sales benefit from any inventory held at these specialty pharmacies and inventory held at the Philidor network pharmacies is reflected in Valeant’s reported inventory levels.
L’Autorité des marchés financiers (AMF) will investigate Valeant after the publication of a controversial report raising questions about the practices of the pharmaceutical giant.
The company denied the allegation, and later investor Bill Ackman said he increased his Valeant stake by about 2 million shares. Valeant said last week it has received subpoenas from federal prosecutors regarding its pricing as well as financial aid it offers to customers. Adding to the negative tone, Yahoo shares fell 5.2 per cent to $31.12, a day after the Internet company’s quarterly earnings and profit missed expectations.
Pershing did not have an immediate comment. Valeant said it would “lay out the facts” regarding allegations brought by short-seller Citron Research in a note on Wednesday. This is a $4 million bet that shares will fall below $52 by January expiration.
Shares of Allergan, which makes Botox, rebounded after the company sought to distance itself from Valeant by saying it does not rely on “specialty pharmacies” to distribute its products. The company also emphasized the growing amount of its revenue comes through its specialty pharmacy partners. “And aggressive revenue-recognition policies can augur bad things”, said portfolio manager Les Funtleyder of ESquared Asset Management.
The report accused Valeant of creating a network of “phantom captive pharmacies” in order to book revenue for products that it hasn’t sold. Those drugs are often distributed by specialty pharmacies.
A spokeswoman for Valeant declined to comment.
Valeant Pharmaceuticals recently disclosed that it has an option to acquire Philidor RX Services. The reason being that other pharmaceutical companies have not been found to have the kind of arrangement Valeant has with Philidor. During the announcement, the CEO at VRX, J. Michael Pearson, informed investors that he believes that VRX has done nothing wrong and that the company has plans to cooperate with investigators.
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Independent Canadian equity research firm Veritas said it saw significant unquantifiable risks overhanging Valeant. Schroer said he does not own shares of Valeant nor is shorting the stock. The claims sent Valeant shares into a tailspin and cut its market capitalization by a few $9.6 billion on Wednesday. With a return potential of 116.1%, the stock’s consensus target price stands at $256.29. “The only difference is I can prove my points”.
