Citron Research says it has a 'smoking gun' on Valeant Pharma (VRX)
(Updated - October 21, 2015 10:22 AM EDT)
Citron Research says it has a "smoking gun" on Valeant Pharma (NYSE: VRX) and lowered its price target to $50.
In a report entitled "Could this be the Pharmaceutical Enron?", Citron Research discusses the recently reported relationship with Philidor RX.
Citron also notes a court filing made by a company called R&O Pharmacy, filed with the California District Court in September, in which this small regional pharmacy claims it had received an improper demand for payment from Valeant to the tune of $69 million.
The report goes to highlight that Valeant's chief executive, revealed on his company’s quarterly earnings call that Valeant had purchased an option to acquire Philidor late last year. He said that Valeant consolidated Philidor’s results in its own financial reports.
Citron asks "Why would Valeant, a major big cap pharma, a darling of the hedge fund crowd, a suitor of Allergan and an aggressive acquirer of pharmas like Salix, Bausch & Lomb, etc., etc., be secretly maneuvering to buy a little known pharmacy with a dubious ownership structure? And then consolidate its financials? Why was this entity NEVER disclosed in any prior company disclosure? "
Citron says Philidor Owns R&O Pharmacy, which it calls the "smoking gun". He links to http://randopharmacy.com/downloads/ro_npp.pdf to prove his point.
Citron said it is apparent to them that Valeant has created a network of "pharmacies" as clones of Philidor. Citron believes they exist "merely for the purpose of phantom sales or stuff the channel, and avoid scrutiny from the auditors."
The research firm said it has seen this before - citing Arthrocare/Discocare in 2008. After Citron exposed the relationship, Arthrocare tried to make it all go away by announcing it was buying Discocare. The entire thing began to unravel when Citron discovered -- and published -- that Arthrocare and Discocare -- ostensibly separate companies, had the same fax number. The CEO of Arthrocare is now doing 20 years.