Valeant says Philidor pharmacy shutting down as it cuts ties
By Caroline Humer and Svea Herbst-Bayliss
(Reuters) - Valeant Pharmaceuticals International Inc VRX.N(VRX.TO: Quote), seeking to allay investor concerns about its business practices, said Friday it is cutting ties with a specialty pharmacy called Philidor Rx Services accused of helping it inflate revenue.
The news failed to stem Valeant's sliding share price, which lost another 12 percent on Friday even after Bill Ackman, whose hedge fund owns a 6.3 percent stake in Valeant, told investors the shares were "tremendously undervalued."
Valeant said it would bolster its internal investigation into the matter by adding to the team an outside lawyer who once worked in the U.S. Department of Justice.
The drugmaker's move comes amid growing pressure from investors after Valeant disclosed two weeks ago that it was under investigation by the U.S. government over its patients' assistance program and drug pricing and distribution.
Influential short-seller Citron Research was one of the first critics to call the company out on Philidor in an Oct. 20 report, saying Valeant was using the pharmacy set-up to inflate revenue. Valeant has denied any wrongdoing.
Citron tweeted Friday that Valeant shares have a better chance of going to zero than Herbalife Ltd (HLF.N: Quote).
Citron said: "$VRX has a better chance of going to 0 than $HLF EVER will. Citron to update full story on Monday. Dirtier than anyone has reported!!"
Valeant disclosed this week that it had paid $100 million for an option to buy Philidor. Bloomberg on Thursday detailed wrongdoing in its processing of medical claims, building on earlier reports about business practices. Continued...