Valeant, a speciality drugs company, was likened to a “pharmaceutical Enron” and its stock sold off almost 20%.
What does this mean?
A company called Citron published a report claiming that Valeant’s close relationship with some pharmacies is masking accounting “fraud” at Valeant. Valeant issued a strenuous denial, calling the claims “false and misleading.” It should be noted that Citron’s Founder disclosed to CNBC that he has a short position in Valeant shares, meaning that he profited significantly from today’s sharp share price decline.But this isn’t the only sign of trouble for Valeant. Its business model – which has often involved buying the rights to “under-priced” drugs and then quickly raising their prices - is under threat from possible new laws. Its stock was already down more than 40% since its peak in July, even before this news.
Personally: Similar type companies also sold off – worsening a real rough patch for “biotech” companies. Biotech had been one of the biggest positive driving forces of the NASDAQ in particular earlier this year - which means it helped to drive the stock market on the whole higher (most probably including your portfolio). The former darling child has now turned into a troublemaker.
Originally posted as part of the Finimize daily email.
The top 2 financials stories in 3 minutes. Join over 400,000 Finimizers