Here Is Why Valeant Pharmaceuticals Intl Inc (VRX) Is Declining Pre-Market

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced that its Audit and Risk Committee and the full Board of Directors have reviewed the company’s accounting for its Philidor arrangement and have confirmed the appropriateness of the company’s related revenue recognition and accounting treatment.

Valeant’s stock continued to declined over 8% in pre-market trading as the call ended.

The company is trying to extinguish concerns ignited by Citron Research, which compared Valeant with the collapsed energy giant Enron. On average, equities analysts predict that Valeant Pharmaceuticals Intl will post $2.89 earnings per share for the current year. TD Securities cut their price target on Valeant Pharmaceuticals Intl from C$300.00 to C$285.00 and set a “buy” rating on the stock in a report on Wednesday, September 30th.

Valeant had generally kept quiet on its relationship with Philidor before last week, because Valeant said it considered its use of such pharmacies as “one of our competitive advantages”.

“Valeant has consulted with experienced and knowledgeable regulatory counsel”. Valeant also consolidates R&O’s financials.

Meanwhile, reports have raised new questions about Valeant’s practices. That’s because under the VIE model, if Valeant is consolidating Philidor’s results, it must have the power to direct Philidor’s most significant economic activities and the ability to share in its profits.

If all this is true, Valeant has a lot of explaining to do about why this is the first time anyone has ever heard of Philidor, and the special accounting for its revenues and inventory that’s required for such an entity.

Citron said in a report on Wednesday that it appears Valeant and Philidor have created a network of phantom pharmacies to trick auditors.

Two other large pharmaceutical firms, Allergan, plc (http://www.marketwatch.com/story/allergan-issues-statement-on-specialty-pharmacy-utilization-2015-10-21).

That may allow them to get past limits on a drug’s use imposed by insurers or a retail pharmacy.

Valeant does have access to Philidor’s books, and says that Philidor has been audited. JPMorgan Chase & Co. restated a buy rating and issued a $250.00 target price on shares of Valeant Pharmaceuticals Intl in a research note on Friday, June 26th. It also said it stands by Andy Davenport, the CEO of Philidor. Michael McKee and Vonnie Quinn report on “Bloomberg Surveillance”.

It was the latest blow to a company whose pricing practices and patient assistance programs are also under investigation by federal prosecutors.