The relationship between Valeant Pharmaceuticals and a small pharmacy is again in focus.
Advertisement
Philidor, north of Philadelphia in Hatboro, Pa., supplies Valeant skin and other dermatology medicines to patients, sometimes even before an insurance company has agreed to cover the cost of a drug, to help “patients get their medicines more quickly”, according to Valeant. That is one of several company practices under investigation by federal prosecutors in New York and Massachusetts.
It’s an assumption based on the fact that Philidor RX Services, a specialty pharmacy that Valeant Pharmaceuticals has an option to buy, has the same phone number and patient privacy disclosure as quite a few other pharmacies.
The report also draws comparisons to Enron that are “too close to ignore”.
The company defended its accounting as sound, saying it classifies products held by the pharmacies as Valeant inventory. The company said that sales are recorded only when drugs are sent to patients.
Valeant has been at the forefront of an intensifying debate over price increases for older drugs in the U.S. The company has been scrutinized by lawmakers for pushing up the prices of heart drugs Isuprel and Nitropress. Citron has no evidence that Valeant is actually making fake sales. The stock’s 52-week high is $96.58.
Ackman’s purchase of an additional 2.1 million shares comes as the firm reels from a precipitous decline in its stock sparked by a damning report from short-side research firm Citron Research.
A long list of prominent investors, including hedge fund star Bill Ackman and the managers of the Sequoia Fund, made billions of dollars in paper gains as stock of Valeant Pharmaceuticals global soared over the past five years. American Express Company (NYSE:AXP)’s EPS of $1.24 was $0.07 short of estimates, while its revenue of $8.19 billion was down by 1.4% year-over-year and missed estimates by $130 million. It had never received a previous invoice from Valeant for any amount. The attack alleges that Valeant has committed fraud. The report published Wednesday said Valeant uses “phantom accounts” to fool auditors and investors. R&O was supposed to pay Philidor for Valeant product dispensed and Philidor in turn should have paid Valeant.
A spokeswoman for Philidor didn’t respond to comment.
“Philidor does not currently have a direct equity ownership in R&O Pharmacy or the affiliated pharmacies, but does have a contractual right to acquire the pharmacies now or in the future subject to regulatory approval”, the statement said.
Arfaei, who claims to be a “strong, vocal Valeant bull”, said his analysis of the company’s cash flows can’t totally refute Citron’s allegations of “phantom sales” or channel stuffing. 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. Inventory held by R&O is on Valeant’s books, he said.
So it’s not hard to see the benefit of a drug company having a relationship with one of these pharmacies. Finally, Jefferies Group lowered their price target on shares of Valeant Pharmaceuticals Intl to $224.00 and set a “buy” rating for the company in a report on Tuesday.
Advertisement
Valeant has declined 55 percent from an intraday peak of $263.81 on August. 6, according to data compiled by Bloomberg.
