Exclusive: SEC probe of Valeant began with review of short seller - sources

Wed Mar 2, 2016 11:00am EST
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By Carl O'Donnell and Sarah N. Lynch

NEW YORK (Reuters) - A U.S. regulatory probe of Valeant Pharmaceuticals International Inc (VRX.TO: Quote), disclosed by the company on Monday, is focused on the drugmaker's relationship with specialty pharmacy Philidor RX Services and was triggered by Valeant’s own request that regulators investigate a short seller's allegations, people familiar with the matter said.

The Monday disclosure of the Securities and Exchange Commission investigation put new pressure on Valeant, contributing to a nearly 20 percent drop in its shares. The company on Monday confirmed the probe but did not provide any details on it. Valeant did not immediately respond to a request for comment on Tuesday.

The Wall Street Journal reported that the probe was focused on Valeant’s relationship with Philidor.

Some of the people interviewed by Reuters said that Valeant Chief Executive Michael Pearson described the Philidor link to some brokerage analysts during one-on-one conversations on Monday and Tuesday.

Pearson said the SEC review was a continuation of an investigation, requested by Valeant, of a short seller that raised questions about Valeant’s business model and ethics, the people said.

In October, Valeant invited the regulator to investigate what it called “completely untrue” allegations from Andrew Left, a short seller and founder of Citron Research, that Valeant used its relationship with Philidor as part of an effort to book false revenues.

The SEC probe that resulted has placed focus on Philidor but has also looked into other areas of Valeant’s operations, the people said.

It is separate from an existing investigation into Salix Pharmaceuticals, which was purchased by Valeant last year, according to a person familiar with the matter.   Continued...

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