Citron Declines to Publish Additional Negative Valeant Reports, Opts to Send Information to Investigative Reporters Instead
November 3, 2015
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – of Valeant Pharmaceuticals rose more than seven percent Monday after Citron Research opted to not publish new allegations against the Canadian drugmaker as many investors anticipated.
Despite the lack of publishing new information, Citron, which is led by Andrew Left, said in a Monday post the short-selling research group has not backed off any of their allegations against Valeant, which included calling the company the “pharmaceutical Enron.” Enron, an energy giant, collapsed following reports of accounting scandals in 2001. Instead, he said the group does not want to be the investigative center of the Valeant connections to Philidor RX Services and other accounting issues the company uncovered.
“While Citron has been at the nexus of information on this story, we will not be releasing new allegations against Valeant in this piece, as we believe that it is not our responsibility to be the judge, jury, and executioner of the company’s deeds. Yes, we have reviewed numerous data points strongly suggesting that Valeant’s operation is far ‘dirtier’ than just Philidor, we are passing all new information on to the mainstream media investigative reporters, whose legal teams are far deeper than those at Citron,” the company posted on its blog.
In an October release, Citron Research decried Valeant for its “unsavory business practices of massive price raises on pharmaceuticals acquired in a rapid succession of acquisitions, while slashing research and development.” Additionally, the Citron report criticized Valeant’s relationship with Pennsylvania-based Philidor Rx Services, a specialty pharmacy acquired by Valeant last year. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company. Some who are critical of the “prescriptions made easy” practice prevents patients and insurance companies from switching to cheaper alternative prescriptions and serves to pad the bottom lines of companies such as Valeant.
Although Valeant’s stock rallied on Monday, Citron said it believes the stock will continue to lose value and described the stock as “toxic” and would not be attractive to investors “until many issues are flushed out.”
Since Citron released its report last week, Valeant’s has dropped about 13 percent of its value. But, Valeant’s stock has lost more than 50 percent of its value in the past few months, falling from a high of $259.98 per share to a low of $106.794.50 per share.
Citron said its prediction about the company stock declining in value is supported by analysts at Goldman, Sachs & Co., which lowered its target price for the stock from $180 to $122 per share.
After Citron’s critical posts about Valeant and its relationship with Philidor helped lead to some serious public relations issues and a continued decline in its stock prices, Valeant announced that it was severing ties with the specialty pharmacy company that has been the subject of scrutiny over its accounting practices. Additionally, Valeant said its Philidor will be shutting down operations as soon as possible.
J. Michael Pearson, Valeant’s chairman and chief executive officer, said in a statement that patients, doctors and Valeant’s business partners have been disturbed by “reports of improper behavior at Philidor, just as we have been.”
"We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility. Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right,” Pearson said.
After Citron released its information on Philidor, Valeant formed an ad-hoc investigative committee to review the allegations.
In addition to criticism of the relationship with Philidor, Valeant is also facing scrutiny from U.S. lawmakers and two U.S. attorney’s offices over pricing of drugs acquired through acquisitions. Valeant is under fire for a price increase of two recently-acquired cardiac drugs, Nitropress and Isuprel, after the company acquired Salix Pharmaceuticals, Ltd. . Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
In addition to the two cardiac drugs, Valeant has also been criticized for quadrupling the price of the 55-year-old drug Cuprimine, used in the treatment of Wilson disease. A New York Times article excoriated Valeant for its practice of increasing the price of drugs following an acquisition. According to a Deutsche Bank report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors, the Times said. Valeant, the article says, spends only about three percent of sales generated revenue on research and development, “which it views as risky and inefficient compared with buying existing drugs.” That amount was about $246 million in 2014.