Valeant Pharmaceuticals International, Inc. (NYSE: VRX)
It has been a dismal week for Valeant Pharmaceuticals International. Despite the doom and gloom, numerous Wall Street analysts are still rating VRX’s stock a Buy. If you have a moth-like desire to fly around flames, then you might want to take advantage of low stock price but if you err on the side of common sense you might prefer to steer clear of a company that has been dubbed ‘uninvestable‘.
Valeant has currently lost 68% of its value. VRX stood at $260 in early August and is now worth but a shadow of its former value at $83.68. Valeant’s shares began their downward descent losing 40% at the end of October and taking about $20 billion off the market cap after short sellers recognized discrepancies regarding the company’s activities.
Valeant’s shares took a violent whack following accusations that the company was obscuring information on the true nature of their activities. Although the shares momentarily recuperated following Valeant’s denial of indecorous dealings, further trouble ensued shortly thereafter when the facts could no longer be obfuscated. This led the shares to continue their cascade. At the end of October, short selling firm Citron Research published a report alleging a secret relationship between Valeant, a subsidiary called Philidor and a customer of Philidor’s called R&O. Valeant had not previously acknowledged the existence of Philidor. Citron compared Valeant to ENRON. Citron claimed that Philidor and the R&O are one and the same. It alleged that Valeant is shipping product to a subsidiary and falsely claiming the revenue. The problem Citron believes, is further complicated by the convoluted structure of the companies. The ruckus has led investors to question the company’s business practicesand its growth prospects.
Citron’s allegations have led to mayhem in the markets for Valeant and it is hard to see a resurrection in sight in the near future. During the latest of a string of damage control calls the company’s CEO, Michael Pearson, stated that the company might see a recovery by the second half of next year, but meanwhile short-term earnings will suffer. One wonders whether Pearson’s words only reflect a pipe dream or whether Valeant’s diversified offerings will truly lead to growth in 2016. It appears it may take rather longer than that for the company to heal its wounds.
About Valeant Pharmaceuticals International, Inc.
Valeant is based in Québec, Canada. The company focuses on neurology, dermatology and infectious disease with a handful of drugs in late-stage clinical trials and several currently on the market. Valeant possesses a portfolio of over 500 products which date back to the company’s previous existence as a group of specialty chemical and radiochemical research, development and supply companies with a history stretching back to the 1960s. Valeant offers a plethora of drugs, including over-the counter medications plus medical devices, and various well-known prescription drugs such as Retin-A, Wellbutrin XL and Elidel.