Nomura Securities analyst Shibani Malhotra reiterated a Buy rating and $290 price target on Valeant Pharmaceuticals (NYSE: VRX) saying the Phihlidor concern is 'likely misinformation':

From the report:

VRX shares were halted earlier today, following reports (e.g., Bloomberg) stating that Philidor, the specialty pharmacy Valeant disclosed it has an option to acquire on Monday’s 3Q15 call, appears to be the owner of the resident California specialty pharmacy R&O. On the 3Q15 call, Valeant also discussed that R&O is one of the specialty pharmacies in the company’s network, and Valeant had sent a letter to R&O requesting payment for ~$69mn gross and $25mn in net revenues for products R&O dispensed to patients that are reflected in Valeant’s receivables. The report primarily alleges that these specialty pharmacies were created for Valeant to book revenues for product it has not sold. While we have been unable to share our analysis with or speak with Valeant, our own diligence suggests that this is not accurate.

Key reason: Valeant has stated numerous times and publicly that it only books revenues on products sold through specialty pharmacies when they have been dispensed; we would use the current weakness as a buying opportunity.

Background on Philidor and Valeant Relationship (Per Valeant’s 3Q15 Slide Presentation)

• R&O does appear to be the California division of Philidor, which appears to have been a strategic decision. In 2013, Philidor was denied a specialty pharmacy license in California, and we believe that R&O was created to allow Philidor access to the California market. We believe that R&O is supposed to pay Philidor for product dispensed by R&O and that Philidor is supposed to then pay its manufacturer clients.

• Valeant is a third party to R&O’s California lawsuit, as R&O appears to owe Philidor revenues for Valeant products dispensed in California. Because it appears that R&O is the California arm of Philidor, it seems R&O was supposed to pay Philidor for Valeant product dispensed and Philidor in turn should have paid Valeant. We believe that this is why a Valeant legal representative sent a letter to R&O requesting payment.

• Valeant assumes collection risk when suing specialty pharmacies. Because revenue is booked when products are dispensed, Valeant’s products are sent to specialty pharmacies on consignment. The company must collect from the specialty pharmacy after products are dispensed. This appears to be why Valeant sent a letter to R&O requesting payment for the “substantial amount of Valeant product” R&O dispensed to patients.

For an analyst ratings summary and ratings history on Valeant Pharmaceuticals click here. For more ratings news on Valeant Pharmaceuticals click here.

Shares of Valeant Pharmaceuticals closed at $146.74 yesterday.