After a brutal week that lobbed $US20 billion off of Valeant Pharmaceuticals market cap, the firm is explaining itself on a conference call to investors Monday.
Already it has disavowed any legal responsibility for questionable business practices at Philidor, a specialty pharmacy that sells its dermatological products. Valeant owns part of Philidor and has the option to buy to buy more.
It also rolls Philidor’s revenue into its own accounting — a practice that it defended in a statement released before the call.
“As we have said previously, our accounting with respect to the Company’s Philidor arrangements is fully compliant with the law,” J. Michael Pearson, Chairman of the Board and Chief Executive Officer of Valeant said.
“However, other issues have been raised publicly about Philidor’s business practices, and it is appropriate that they be fully reviewed. This decision to create an ad hoc committee of the board, which I fully support, will help free management to focus on continuing to serve doctors and patients and run our business.”
It also said it stands by Andy Daveport, the CEO of Philidor.
What the heck is Philidor?
Until last Monday no one had ever heard of Philidor or its “network” of other specialty pharmacies. Its existence was revealed during Valeant’s third quarter earnings call after the company had already come under intense political scrutiny for its pricing practices.
Then pieces in the New York Times and The Southern Investigative Reporting Foundation highlighted questionable practices at Philidor, and on Wednesday short seller Citron Research accused Valeant of using its specialty pharmacies to perpetrate fraud.
As proof, Citron offered a California lawsuit between Valeant/Philidor and R&O. In a letter, Valeant claimed R&O owed it $US69 million, R&O responded with a lawsuit saying that it had no relationship with Valeant and had never received correspondence from the company until that day.
Citron’s report cratered Valeant’s stock, and Valeant has said it will submit a request that Citron be investigated by the SEC.
Either way, as details of the R&O lawsuit trickled out to the public, Wall Street started asking a new set of questions about Valeant, and how much of its business leans on opaque specialty pharmacies.