Valeant Pharmaceuticals faces years of legal challenges despite cutting ties with a USA pharmacy at the centre of a controversy about how Canada’s largest publicly traded drug firm conducts its business, say industry observers and the company’s second-largest shareholder.
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Shares of Valeant have lost more than half their value since mid-September as the company came under fire on several fronts, such as evidence of extreme price hikes for several of its drugs and allegations that it used Philidor to inflate revenue and circumvent insurer controls on high-cost prescriptions.
Quebec-based Valeant said Friday that Philidor had informed the company that it would shut down as soon as possible. The firestorm began last week after a short-seller run research group alleged that Valeant was controlling a series of shell pharmacies to conjure up sales that never really occurred.
“We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility”, he added.
In the press release announcing Philidor’s closure, Valeant spoke of the company as if it were a separate operation.
Valeant has also been criticised by doctors, politicians and insurers for its approach to drug pricing, which has sometimes seen them buying old medications and raising the prices.
Ackman spent four hours Friday defending his bet, placing the blame for the plunge on bad public relations, the market’s inability to understand the complexities of Valeant’s business model, jealous rivals and bad journalism.
The Valeant purchase-option agreement for Philidor was signed in December 2014.
Valeant said sales of its drugs through Philidor, including acne medicines and a treatment for toenail fungus, accounted for about 7 percent of its total third quarter revenue. They may be connected through Philidor and West Wilshire Pharmacy in Los Angeles, but regardless of how they are linked, Valeant claims that R&O owes them $68 million for drugs it provided.
In an interview with Bloomberg News, Left mocked Ackman’s assertion that he was unaware of Valeant’s full relationship with the mail-order pharmacy that has unnerved investors, as well as Ackman’s contention that Valeant would overcome its current problems.
“Valeant’s drugs are provided to patients through many channels, including traditional retail pharmacies, specialty pharmacies, and directly from health care providers”, said Valeant Spokeswoman Laurie Little in an emailed statement.
On Friday morning, Valeant said it will sever “all ties” with Philidor.
Last month, members of the House Committee on Oversight and Government Reform sent a letter to Chairman Jason Chaffetz, R-Utah, asking him to issue a subpoena to Valeant Pharmaceuticals and to invite the Canadian company to testify before Congress. He also cited the example of a young Warren Buffett’s 1963 investment of about $20 million in American Express (AXP) after its stock tanked more than 40 percent amid the company’s connection to a scam involving vegetable oil.
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Citron has made comparisons between Valeant and Enron, the energy company that filed bankruptcy in 2001 amid massive accounting fraud.
