Drugmaker Valeant to feel sting of closing controversial pharmacy

Tue Nov 10, 2015 2:00pm EST
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By Euan Rocha and Rod Nickel

TORONTO/WINNIPEG (Reuters) - Valeant Pharmaceuticals International Inc (VRX.TO: Quote) (VRX.N: Quote) said on Tuesday its dermatology business would be hurt in the short term as it moves rapidly to sever ties with a controversial specialty pharmacy.

As of last week, Philidor Rx Services has stopped handling insurance claims for drugs and it will cease operations by the end of January, Valeant Chief Executive Officer Mike Pearson told investors and analysts on a conference call on Tuesday.

The call, however, failed to allay concerns about the one-time stock market darling. Valeant's volatile shares, which fell as much as 7.5 percent in morning trading, turned higher in the afternoon after one of Valeant's main critics stated he had trimmed his short positions in the stock.

"My short on Valeant has been significantly scaled down from where it was earlier," said Andrew Left of Citron Research in an interview on CNBC on Tuesday.

The influential short-seller had precipitated a steep slide in the stock in October after his firm claimed Valeant was using an undisclosed relationship with Philidor to inflate revenues. Valeant, which is also being probed for aggressive drug pricing practices in the United States, has since cut ties with Philidor and said it was investigating its practices.

"We believe management's openness and transparency on the call was a good first step in rebuilding investor confidence," said Canaccord analyst Neil Maruoka in a note, adding that persistent uncertainty around the impact of Philidor and U.S. drug pricing continues to weigh on the stock.

SHORT-TERM HIT   Continued...

The headquarters of Valeant Pharmaceuticals International Inc., seen in Laval, Quebec November 9 2015. REUTERS/Christinne Muschi