Andrew Left, founder at Citron Research, the stock-commentary site that raised questions about Valeant Pharmaceuticals that led to a stock rout spoke to Bloomberg Television today. He discussed his allegations against Valeant and Philidor, Bill Ackman, and the stock reaction.
On whether he has proven the claims he’s made, Left said: “It’s also not my job to actually prove it. I promise, if you gave me subpoena power, six months and unlimited resources, I would be no doubt be able to prove it.” He added: “What they are doing right now appears to be illegal.”
When asked to describe his accusations against Valeant, Left said: “It has been 24 hours since I have put this story out. The reason why I did not respond yesterday is I wanted to hear the company’s response…It has been 24 hours and I am more confused today than yesterday about the actual ownership structure and the chain of command there.”
On the responses from Valeant and Philidor, Left said: “To be honest — The responses are amateurish. And that’s why the stock’s reacting the way it is.” He added: “There’s a reason why the stock is down even today is because once everybody saw the responses from the sellside and from the company and Philidor, Wall Street’s decided that there’s a better chance than not that this smoke is actual fire.”
Valeant’s Response ‘Amateurish,’ Says Citron Founder
What Valeant’s Doing ‘Appears to Be Illegal’
Full Interview here.
ALIX STEEL: Here to talk about the report is the man behind the analysis, Andrew Left. He is the founder of Citron Research and he joins us exclusively now from Los Angeles.
Also our own Drew Armstrong is joining us. He has been following this story very closely for Bloomberg News.
Andrew, thank you so much for joining us. It was an incredible story yesterday when that Valeant news broke from your research firm.
What is the No. 1 thing you are accusing Valeant of and what is your proof to back it up?
ANDREW LEFT: If you read the story, you will see what I’m accusing Valeant of and it’s not as much of an accusation, but we see it, is the specialty pharma company that they are running many of their prescriptions through, is called Philidor. And last week, a unique document came out which came from Valeant’s general counsel requesting a $69 million payment from a small pharmacy in Camarillo, California.
And then it came out to be that the pharmacy does not actually owe the money to Valeant, but they owe the money to, instead, the specialty pharmacy company called Philidor. Which, if you read on Citron, or you could read on the Southern Investigative, SIRF, it is a very shadowy organization.
And then it came to the ownership structure of it. And what it seemed to be then is Valeant was issuing an invoice to themselves. It has been 24 hours since I have put this story out. The reason why I did not respond yesterday is I wanted to hear the company’s response. I wanted to hear the sellside analyst response, and I wanted to hear Philidor’s response. It has been 24 hours and I am more confused today than yesterday about the actual ownership structure and the chain of command there.
DREW ARMSTRONG: Andrew, but we do have those statements out right now from the entities you mentioned. So what is your response? You have seen what Valeant has to say. They say no, in fact, we are recording this revenue properly. Philidor has been out there explaining some of their relationships.
So when you see that, given the claims that you have made, which are pretty extraordinary claims, you know, channeling stuffing, phantom accounts, you compare them to Enron, you know — What is your response to what they say is a dismissal of your claims?
LEFT: OK. We’ll start with the claims made by Valeant that Philidor — they do not owe Philidor, but they run the Philidor financials through Valeant. So Valeant has been an overdiscussed company on Wall Street for the past year and a half. From the analyst community, obviously it is a hedge fund darling. There is not one person who have even heard about Philidor until three days ago. And now, we not only hear about it, but they have an ownership structure – they do not own them, but they consolidate their financials underneath them. When they gave that as an answer, obviously, it is not me. Look what the market is telling you. When a stock this morning is trading 25 million shares at $100 a share, that is Wall Street saying hey, we do not trust your answer.
Now, we’ll move to the second part, which is actually even more extraordinary. Why Philidor would have the same exact fax number and the same contact information as one of the pharmacies they supplied to, which was the subject of this $69 million invoice. And the response was Philidor provides web services and IT support for this pharmacy. So Valeant, which apparently controls Philidor, which Philidor in turn provides IT services for pharmacies, Valeant is making websites for pharmacies? And pharmacies are outsourcing their chief privacy officer for Philidor? None of it makes sense, as a matter of fact, and maybe I will do this in the next few days. If I take all the responses from all the sellside and I include with it the responses from the companies, you will see three different stories. To be honest — The responses are amateurish. And that’s why the stock’s reacting the way it is.
ARMSTRONG: You’re saying that this stuff does not make sense and I think a lot of people are looking at Valeant right now and asking a lot of questions. But some of those questions are different than the ones that you’ve raised and they’re more fundamental to Valeant’s business model, but less focused on, you know, illegality, fraud, channel stuffing and some of these comparisons.
Do you feel you have really actually proven some of the claims you make? I mean, you have a title in your reporter, you know, “The Smoking Gun,” as if you have nailed this thing down. That seems like a pretty bold claim to make when most of what you’re doing is raising questions.
LEFT: It is an absolutely bold claim. It’s also not my job to actually prove it. I promise, if you gave me subpoena power, six months and unlimited resources, I would be no doubt be able to prove it. But – based on the available public information that’s out there, on the publicly available information, when I can show shared ownership of something and then I can show an invoice going from one entity to the next, that is what we pretty much call a lot of smoke. And if you don’t want to say there’s fire – There was smoke with Valeant last week and then the smoke keeps increasing on a daily basis. And I think when you saw today all – There’s a reason why the stock is down even today is because once everybody saw the responses from the sellside