CEO prepares for day of reckoning over Valeant fraud allegations
pharmafile | October 26, 2015 | News story | Sales and Marketing | J. Michael Pearson, Valeant
Troubled Valeant Pharmaceuticals last week announced strong third quarter revenues, reporting a 36% increase in revenues to $172 million, but an atmosphere of increasing controversy surrounding its business practices has seen its share price plummet 35% and market value hit by between $10 billion and $20 billion.
The Canadian-based drugmaker is reported by the short-seller Citron Research to have used ‘phoney specialty pharmacies’ in order to distribute its products to customers directly at a discounted co-pay rate and so bypass health insurers: allegations company executives will be forced to shed light on to its investors during a conference call later today.
The pharmacies- to which Valeant has not disclosed its relationship- are alleged to push Valeant products to customers with intensive telemarketing, and the profits they take are believed to account for as much as 10% of the company’s sales.
One pharmacy in particular, Philidor, took much of the spotlight in the report, with Citron pointing out that Valeant was its only customer and may have been using the company to book fictitious revenues.
Citron- run by Andrew Left- has historically been vocal in its criticism of Valeant and dubbed the company “the pharmaceutical Enron.”
Its new allegations, which first emerged last Wednesday, are a further blow to Valeant’s image, which has recently been damaged by its policy of large price increases on recently-acquired drugs: perhaps with the intention of plugging sales gaps caused by falling revenues from its older products.
Such increases on the drugs Nitropress and Isuprel resulted in the company being subpoenaed in the US recently, although CEO, J. Michael Pearson said Valeant would fully co-operate with the investigation.
Nevertheless, it is sure to be an intense day for Pearson, as he faces an investor conference call at midday UK time, although the 55-year-old may be somewhat comforted by the fact that he has received “unanimous and strong support” from the company’s board as recently as Friday.
Indeed, lead director, Robert Ingram said the company under Pearsons’ leadership has been a “phenomenal success” and that the CEO was “one of the most proven people I’ve met in terms of overdelivering in what he commits to.”
Valeant last week announced same-store sales growth of 13% and revenues from its February acquisition Salix of $461 million, and upgrading full-year guidance of $11-11.2 billion revenues from $10.7-11.1 billion.
“We look forward to our call on Monday where we will address and refute recent allegations,” the CEO said in a statement.
Joel Levy
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