Valeant drops to 2-yr low after cutting ties with Philidor

Beleaguered drug giant Valeant Pharmaceuticals worldwide (NYSE:VRX) said Friday that it’s severing all ties with specialty pharmacy Philidor, which it said would be shutting down completely as criticism mounts over its business practices.

The company’s share price has dropped 32% in the two weeks following accusations of an inappropriate relationship the pharmacy Philidor.

Citron has accused Valeant of using Philidor to create “phantom sales” of its products.

It wasn’t until last week that Valeant revealed it was close enough to Philidor to have an option to buy it. And Charles Ornstein at ProPublica, using documents from the board and the Delaware secretary of state’s office, described how Philidor “used a backdoor approach” to circumvent the board and continued to deliver Valeant’s drugs to the state.

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. Valeant’s secondary loan price fell for a second day on Thursday in volatile trading, pulling down trading levels for a range of other drugmaker loans, according to Thomson Reuters Loan Pricing Corp. “We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant and the patients and doctors we serve”. The stock has a market capitalization of $38.26 billion and a price-to-earnings ratio of 64.04.

Valeant Pharmaceuticals worldwide Inc.’s woes are having an outsize impact on a few of Canada’s biggest funds, which flocked to the Montreal company’s shares in search of growth as commodities stocks sagged. He also said he had visited Valeant’s headquarters to give employees a “pep talk”.

Explosive, unproven allegations against Valeant Pharmaceuticals have caught the eye of a Canadian regulator and raised serious questions about the company’s business structure – even from its long-time supporters.

Based on the outcome of its own review, Valeant emphasized that the company’s revenue recognition policy and accounting plan are in compliance with the law.

Philidor represented 6.8 per cent of Valeant’s revenue in the third quarter, including large quantities of its toenail fungus medication Jublia. Its overall volume is 10.71 million shares right now, and average trading volume of 2.40 million.

He also found that, without his knowledge, a Philidor executive who had never visited the Camarillo pharmacy was answering questions about the pharmacy’s billing practices during an audit by an insurer. They said the intent was to fill more prescriptions with Valeant products instead of generics.

Express Scripts Holding Co., the nation’s largest manager of prescription drug benefits, said in a statement that it is “in the process of terminating the Philidor pharmacy from our network”.

Valeant said Left’s allegations were incorrect.

On Monday, when the committee was announced, Philidor issued a statement saying it welcomed the creation of the committee and it was “proud of the company we have built and value our working relationship with Valeant”.