It may seem the phrase manufactured misfortune was invented for Valeant Pharmaceuticals Intl Inc (NYSE:VRX, TSE:VRX).
Just over a week since reporting a third quarter loss of $1.22bn (read more), the company is again in the negative headlines.
https://www.proactiveinvestors.com/companies/news/168700/valeant-pharmaceuticals-cuts-forecasts-again-168700.html
At one point early on Thursday its shares slumped more than 5% after US prosecutors said the head of a pharmacy chain once controlled by Valeant and a former executive at the drugmaker had been indicted on federal charges that they defrauded shareholders.
Andy Davenport, chief executive of Philidor, a now-defunct pharmacy group, and Gary Tanner, an ex-Valeant manager, were charged with multiple counts by federal prosecutors in Manhattan, including wire fraud and conspiracy to launder money. A press release said that the charges stem from a “multi-million dollar fraud and kickback scheme.”
But by the close Valeant was thrown a life line as shares recovered through the session and ended up 0.7% at $17.98 in New York. Meanwhile, in Toronto, the stock closed up 1.1% at C$24.30.
As indeed they might. For neither of those indicted presently work for the company.
Not that investors will see it that way. An investigation will require hard questions of the ethics and processes at work inside Valeant that led to the alleged charges against Davenport and Tanner.
Prosecutors accuse Tanner and Davenport of fraudulently building Philidor, a Pennsylvania-based specialty pharmacy, through its near-exclusive access to Valeant. The complaint alleges Tanner and Davenport colluded to make Philidor the de facto sales channel for Valeant, while conspiring to evade oversight from Valeant’s upper ranks and side-step the company’s broader corporate policies.
It further states Tanner, who was fired by Valeant in August 2015, fraudulently concealed his interest in Philidor from the company and that Davenport exclusively controlled the business through an entity called End Game LLC, which connected to his bank account, End Game LP. Ultimately, the conspiracy would yield Davenport $40 million and Tanner $10 million.
Valeant, the company which owns Bausch & Lomb, one of the largest manufacturers of contact lenses, has scaled the top of Canada’s corporate world and then seen most of its achievements smashed in a 90% stock price rout since 2015 and narrowly averted a default on the $30bn debt load it picked up during many years of acquisitions.
For a while in 2015 Valeant was the most valuable company in Canada. Valeant was described as a platform company that grows by systematically acquiring other companies. Valeant acquired Salix Pharmaceuticals for $14.5bn in 2015. Valeant tried to acquire Actavis and Cephalon and merge with Allergan (NYSE:AGN), but failed.
But since last year the company was involved in a controversy about drug price hikes and the use of a specialty pharmacy for the distribution of its specialty drugs. Over 14 months, the company's stock price plummeted nearly 90% since the peak. Valeant reversed the price hikes and ended cooperation with specialty pharmacy Philidor Rx Services and Walgreens took over distribution.
The company remains under investigation by the US Securities and Exchange Commission in a multiple of regulatory probes.