Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
According to the news, Valeant Pharmaceuticals has been having a rough time in the market as of late, and rightfully so. Recently, Citron published a report claiming that VRX was the Enron of the pharmaceutical industry. When the report was first published, like most investors, I didn’t want to believe the claims. After all, calling any company the Enron of any industry is a very heavy comment to get back from. However, as more and more evidence has been released, I have no choice at this point to believe that Valeant has made some very bad decisions. Today, we’ll talk about the big problems that VRX is facing, the back lash we’ve seen so far and what we can expect to see moving forward. So, let’s get right to it…
Citron Launches Heavy Accusations
Just last week, Citron released a statement that ultimately uncovered Valeant Pharmaceuticals’ relationship with a specialty pharmaceutical company known as Philidor RX. According to the report, Valeant Pharmaceuticals was using relationships with smaller pharmacies as a way to pad revenue and earnings, ultimately giving investors false information and leading to stronger market growth. As the story unfolded, we found out that Valeant Pharmaceuticals was Philidor’s only customer. This raised enough red flags. However, more flags raised when the company announced that it had purchased a option to acquire Philidor late last year; which led to another question… Why would VRX, the company that aggressively acquires larger pharmaceutical companies want to acquire a company of which it is its only customer? How would consolidating finances with this company help? Ultimately, many investors are arguing that it would help keep things covered up… but the story becomes even more interesting!
Illegal Changes Were Made At Philidor
While I’d like to put this in my own words, I think that Bloomberg reported it just right. Essentially, Philidor RX employees were given instructions to break the law. Here’s what Bloomberg had to say…
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“Workers at the mail-order pharmacy, Philidor RX Services LLC, were given written instructions to change codes on prescriptions in some cases so it would appear that physicians required or patients desired Valeant’s brand-name drugs – not less expensive generic versions – be dispensed, the former employees said… Ex-employees who worked at Philidor in the last two years, and who asked that their names not be used discussing their former employer, confirmed that prescriptions were altered as the document details. They said the intent was to fill more prescriptions with Valeant products instead of generics.”
What? I know I read that right, but never thought this would be something I would be quoting with regard to VRX. Ultimately, this kind of claim warrants more than a decline in the value of the stock, it warrants a federal investigation, something that I’m not sure is too far off!
The Story Has Only Unfolded For A Week
At this point the saddest part of the story is the fact that we haven’t received all of the details. After all, we’ve only heard about this issue for about a week at this point. I shutter to think about what we’re likely to hear over the next couple of months. Leading us to the title of this article…
Valeant (VRX) Investors You Have One Move To Make: Run!
I stick by this statement. At this point, there is no reason to stick by Valeant. It is obvious that they have made horrible moves that are likely to lead to more and more declines, and I wouldn’t be surprised if after a federal investigation, the doors to the company were closed. Since this story broke, VRX has lost almost $90 per share and that loss is likely to continue in a big way! I know that at this point, some investors will want to wait and see if they can recuperate at least some of their losses. Unfortunately, the opportunity to recuperate simply isn’t going to be there. Get out now before you lose more!
What Do You Think?
Where do you think VRX is headed and why? Let us know your opinion in the comments below!
Disclaimer – The author of this story, Joshua Rodriguez, has no shares in any stock mentioned in this post and does not plan on entering any positions in any stock mentioned for at least 72 hours.