Valeant to Hold Conference Call on Monday to Address Critical Report

"Valeant Pharmaceutical's strategy is more reflective of a hedge fund than an innovative biopharmaceutical company", drug industry's Washington lobbying group said in a statement.

Citron, known for publishing free research that is often critical of highflying companies, questioned Valeant's inventory accounting of the drugs supplied by the pharmacies, alleging that Philidor and R&O Pharmacy are the backbone of a "fraud to create invoices to deceive auditors and book revenue".

A long list of prominent investors, including hedge fund star Bill Ackman and the managers of the Sequoia Fund, made billions of dollars in paper gains as stock of Valeant Pharmaceuticals global soared over the past five years.

Any inventory at pharmacies in the Philidor pharmacy network are included in Valeant's consolidated inventory balances - there is no sales benefit from any inventory held at these specialty pharmacies and inventory held at the Philidor network pharmacies is reflected in Valeant's reported inventory levels. The company said that sales are recorded only when drugs are sent to patients. "We believe that the stock price does not reflect the quality of Valeant's franchises and future cash flows, and the business development, capital allocation and operating abilities of its management team", Ackman had said in his third quarter letter.

Ackman defended Valeant at the Bloomberg Markets Most Influential Summit on October 6, saying drug companies put their profits into research and acquisitions, rewarding investors and producing more innovative products. Valeant acquired Glumetza when it bought Salix Pharmaceuticals Ltd.in February.

BMO did it because they "cannot defend the specialty pharmacy structure" that Valeant has built within its business.

Valeant last week said it is under investigation by the USA government over its pricing, distribution and patient assistance programs. According to the Financial Post, shares of the company dropped as much as 39 percent earlier in the day on the New York Stock Exchange.

The latest data indicated that short interest positions in Valeant's stock in the USA market have more than doubled since mid-August, jumping to 7.1 million shares at the end of September. Investors bailed on the company after Citron Research put out a note titled "Valeant: Could this be the Pharmaceutical Enron?".

Citron's report alleged that Valeant appeared to have created a string of "phantom captive pharmacies" that receive the company's medications. Valeant said Monday that it has an option to acquire Philidor. A few see the share price collapse as a buying opportunity, while others think it's best to wait it out.

The largest shareholder, Ruane, Cunniff & Goldfarb Inc., owns 33.88 million Valeant shares, and could be losing $2.18 billion this week, according to FactSet; T. Rowe Price Associates, the second-largest shareholder with 20.46 million shares, could be losing $1.32 billion this week. Valeant spokeswoman Laurie Little was not immediately available for comment.

The markets are up this morning thanks to positivity surrounding the strong earnings results of McDonald's Corporation (NYSE:MCD), among other companies.