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(Reuters) - Valeant Pharmaceuticals Inc (VRX.TO)(VRX.N) shares rebounded on Friday from four days of steep losses over allegations of fraud, which it denied, but this week's stock selloff has already cost the company's chief executive well over $1 billion.
The value of Chief Executive Mike Pearson's stake in the company had stood at $2.66 billion when Valeant shares peaked at $263.70 on Aug. 5 on the New York Stock Exchange, according to filings. The value of that stake sunk to about $1.11 billion as of close of markets on Thursday.
Laval, Quebec-based Valeant on Thursday moved to reassure investors, saying it would address the allegations in detail on a conference call on Monday. The stock began to recover after that announcement, although it still closed lower on Thursday.
On Friday, shares climbed about 10 percent in Toronto and 9 percent in New York trading, to C$157.89 and $119.81 respectively. They had lost 25 percent in the previous two trading days.
"I'm hoping the modest bounce today is the market collecting themselves again and trying to inject some rationality into this whole thing," said Annabel Samimy, analyst at Stifel Nicolaus & Company.
Concerns about Valeant are overblown and based on a misunderstanding of how the U.S. drug supply chain works, she said.
A law firm announced a lawsuit against Valeant and seeks class action status on behalf of buyers of the company's stock between Feb. 23 to Oct. 20 after influential short-seller Citron Research alleged the Canadian drugmaker used specialty pharmacies to create "phantom sales."
The company has already issued statements denying the claims. Valeant did not immediately respond to multiple requests for comment on Friday.
BMO analyst Alex Arfaei said in a note on Friday that he was concerned about Valeant's lack of disclosure until recently about its relationship with a pharmacy called Philidor.
"Not disclosing these types of financial relationships left Valeant vulnerable to the types of weak allegations raised by Citron," Arfaei said.
Citron's allegations have heaped pressure on Valeant, which is already under scrutiny for price hikes on drugs that it has acquired, including investigations by federal prosecutors in New York and Massachusetts.
Reporting by Rod Nickel in Winnipeg, Manitoba, with additional reporting by Euan Rocha in Toronto; Editing by Nick Zieminski