UPDATE 5-Valeant shares plunge on short-seller scrutiny of pharmacy revenue

Wed Oct 21, 2015 5:33pm EDT
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* Citron Research alleges fraud

* Valeant categorically denies allegations

* Pershing Square adds to position -report

* Valeant shares cut losses, last down 18 pct (Adds background, updates share price, market values)

By Caroline Humer

NEW YORK, Oct 21 (Reuters) - Valeant Pharmaceuticals International Inc's stock plunged as much as 40 percent on Wednesday after an influential short-seller accused the company of using specialty pharmacies to inflate its revenue, an allegation that the drugmaker denied.

Citron Research, a short-selling firm run by Andrew Left, alleged that Valeant's previously undisclosed ties to specialty pharmacies, including Philidor and R&O Pharmacy Inc, helped the company create "phantom sales" of its products or push more product through distribution channels than sales would warrant.

"Citron believes the whole thing is a fraud to create invoices to deceive the auditors and book revenue," the research note said.

In response, Valeant said it does not record sales of drugs that are stocked as inventory at such pharmacies in its consolidated financial reports and said sales are recorded only when the product is dispensed to the patient.   Continued...