In a chaotic day of trading, once-highflying Valeant Pharmaceuticals defended itself against some of the most severe criticism yet of its business practices, denying allegations of improper accounting from an investor who is betting against the company. The short-seller’s report knocked Valeant’s stock down wiping some $20 billion from its market value .
The report, from research firm Citron Research, fanned concerns about Valeant’s accounting, raising questions about its use of certain pharmacies to supply its drugs and its accounting for the dispensing. Valeant “categorically” denied the report.
Doubts about the sustainability of the approach, long harbored by hedge funds that made and lost bets against the company, came into the open after Valeant sought to make its biggest deal yet last year with a hostile offer for Botox maker Allergan. In fighting back, Allergan’s then-CEO David Pyott campaigned against Valeant’s accounting practices and said its aversion to research threatened its ability to find new growth sources.
Valeant said last week it had received subpoenas from federal prosecutors asking about its drug pricing and patient-assistance programs.
The company said it would change its approach, spending more on R&D and focusing more on reducing its debt than on dealmaking. Shares fell nearly 8% that day.
When you charge patients and government the highest prices ever it is ok, but when you screw up with hedge Fund, you go down. Just a thought.
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