In a case of supreme poetic justice, the SEC probe into Valeant which was reported on Monday and which led to a 20% plunge in the price the company’s shares and resulted in Pershing Square’s -19.9% performance through the end of February, was started by Valeant itself following its request of an SEC investigation into short-seller Citron’s claims which made the rounds last fall, and which were among the numerous catalysts that precipitated the historic drop in the price of VRX stock.
As Reuters reports, the regulatory probe of Valeant Pharmaceuticals International, disclosed by the company on Monday, is focused on the drugmaker’s relationship with specialty pharmacy Philidor RX Services and was triggered by Valeant’s own request that regulators investigate a short seller’s allegations, people familiar with the matter said.
Pearson said the SEC review was a continuation of an investigation, requested by Valeant, of a short seller that raised questions about Valeant’s business model and ethics, the people said.
In October, Valeant invited the regulator to investigate what it called “completely untrue” allegations from Andrew Left, a short seller and founder of Citron Research, that Valeant used its relationship with Philidor as part of an effort to book false revenues.
The SEC probe that resulted has placed focus on Philidor but has also looked into other areas of Valeant’s operations, the people said.
As Reuters adds, this is separate from an existing investigation into Salix Pharmaceuticals, which was purchased by Valeant last year. Ironically, it was none other than Jim Cramer who one year ago said “Valeant’s Not Done Going Higher, Buy on Salix Acquisition.”
In that matter, the SEC is primarily focused on whether the former executives misled investors about inventory levels for certain key drugs.
Reuters’ report is based on private conversations that Michael Pearson has had with analysts, which some have suggested may be a violation of Reg-FD: “Some of the people interview by Reuters said that Valeant Chief Executive Michael Pearson described the Philidor link to some brokerage analysts during one-on-one conversations on Monday and Tuesday. “
Valeant told analysts it planned on revealing the SEC investigation in its 2015 annual 10-K report, which has not yet been filed after being delayed by the company, the people said.
As a reminder, just last week Valeant said that Philidor relationship which would lead to the restatement of results, would have a nominal effect on the compnay’s bottom line.
As of this moment the SEC appears to disagree, but the best explanation of this snafu comes from the Twitter account of @JeopardyStocks which summarizes the poetic irony as follows:
“What is: Valeant?” $VRX http://pic.twitter.com/Mld2yypX67
— Jeopardy! Stocks (@JeopardyStocks) March 2, 2016
via Zero Hedge http://ift.tt/1OPqXMD Tyler Durden