The stock fell 13 percent to $102.83 at 12:49 p.m.in New York, after dropping 19 percent on Wednesday.
Advertisement
It alleges Valeant created a network of pharmacies to distribute its products and avoid the scrutiny of auditors, musing whether the company was a “pharmaceutical Enron”.
The report from short-selling research firm Citron Research raised questions about Valeant’s relationship with specialty pharmacies known as Philidor Rx Services LLC and R&O Pharmacy Inc., which help patients fill their prescriptions for Valeant medicines and pay for out-of-pocket costs. Valeant has also been scrutinised by lawmakers for pushing up the prices of heart drugs Isuprel and Nitropress – and Citron has said those price hikes have disguised a lack of growth.
“It is apparent to Citron that Valeant has created a network of “pharmacies” as clones of Philidor”, the report says. Key reason: Valeant has stated numerous times and publicly that it only books revenues on products sold through specialty pharmacies when they have been dispensed; we would use the current weakness as a buying opportunity. The company said it properly accounts for sales to, and inventory, at Philidor and Philidor’s network pharmacies.
Valeant will host a conference call on Monday to address the allegations.
Star CNBC commentator Jim Cramer said Valeant Pharmaceuticals global Inc.’s stock meltdown was one of the most frightening experiences of his professional investing career.
At its peak closing price of $262.52 in early August, its stock had climbed more than 1,000% over five years. The business had revenue of $2.79 billion for the quarter, compared to analysts’ expectations of $2.06 billion.
Valeant has been a popular stock among hedge fund managers.
Investors are asking how Valeant is connected to a whole host of smaller companies right now. He said he had a financial position in Valeant but declined to offer details.
Alex Arfaei, an analyst with BMO Capital Markets who had long held a “buy” rating on Valeant, downgraded the company on Thursday to “market perform”.
Short-seller Citron Research, the company that published the report, called Valeant the “pharmaceutical Enron” and gave it a price target of $50. This week will be very interesting to see how shareholders respond to these accusations as day traders may be presented with ideal trading opportunities.
U.S.-traded shares of Valeant Pharmaceuticals worldwide Inc. were down about 18 percent, or US$26.56, to US$120.18 Wednesday afternoon, while broader indexes were almost flat.
The company on Monday said it would change its approach, spending more on R&D and focusing more on reducing its debt than on dealmaking.
Advertisement
Valeant’s share price has already been hit hard in recent weeks as it has been drawn into the price-gouging scandal now playing out in the USA pharma industry, and is now facing a congressional investigation. While commodity producers have largely paced that rebound, resource prices slumped Wednesday after a decline in Japanese imports bolstered concern that demand in major economies is ebbing.
