Shares of Valeant (T.VRX) were traded at their lowest level in more than a year on Wednesday following the publication of a controversial report raising questions about the company’s practices.
On the TSX, the action of the pharmaceutical giant Laval plunged 39% to $ 116.19, before recovering to $ 157.02 in mid-afternoon. Transactions on the title were even briefly suspended twice because of an unusual volume.
This new slump was triggered after the broadcast of a note from Citron Research raising questions about Valeant practices in distribution.
Led by short seller Andrew Left, the research firm has already published critical reports for Valeant looks at overvalued stocks and companies to potentially fraudulent practices.
The document suggests that Valeant uses affiliated pharmacies Philidor the company in order to accumulate inventories and then present these transactions as sales.
“Valeant and Philidor have established a comprehensive network of pharmacies ghosts” to generate phony drug sales so to escape the audit of regulatory authorities, according to Citron Research, which lowers even at $ 50 its target share price of Valeant.
This analysis comes after the publication of articles in the New York Times and the Southern Investigative Reporting Foundation on Philidor and R & O Pharmacy, two specialty pharmaceutical companies with which Valeant operates.
Email, Valeant has refuted allegations of Citron Research, calling them “erroneous.”
“The misleading statements to the place of Valeant look like an attempt to manipulate the market to drive down the share price, wrote a spokesperson. We reiterate (…) our compliance with accounting rules and laws. ”
Valeant says less than five% of its inventory in the United States is in specialized pharmacies.
Monday, unveiling the results of the third quarter, the big boss Valeant Michael Pearson, had said not to have raised Philidor in the past because he did not disclose that advantage to its competitors.
Like many companies in this sector in the US, Valeant revenues come from products sold to pharmaceutical directors, he explained to analysts.
For his part, Neil Maruoka of Canaccord Genuity, does not adhere to the thesis of Citron Research that Valeant artificially inflates its revenues through a network of pharmacies.
“Simply highlight links does not necessarily mean that something negative is going on,” the analyst wrote in a report.
Mr. Maruoka does not believe that the Quebec company would rig up its revenue, but it nevertheless considers that it is facing a “credibility problem”.
“Due to the multiple attacks on the Valeant (such as drug prices and research and development), we do not believe investors will rush on the title,” he added.
Meanwhile, the firm’s New York Rosen Law Firm, specializing in the rights of shareholders, survey “potential misleading information” provided by Valeant. She is preparing a class action to recover sums lost by investors of the pharmaceutical giant.
Valeant is currently under scrutiny by political and judicial authorities in the United States after making large increases in the prices of certain drugs, a decision that sparked controversy.
Federal prosecutors in Massachusetts and New York have also received orders to pharmaceutical giant urging him to produce certain documents.
The market value of Valeant, which peaked last August, has since collapsed by about 60%.