Health care stocks went through tough time with losses Wednesday after a negative report about a Canadian drug maker, Valeant Pharmaceuticals International (NYSE:VRX).
In the past, Valeant has returned over 900% to investors in a very few years. This company is the largest Canadian public company, and is the largest pharmaceutical in Canada. Its business strategy is to acquire neglected old drugs that are sold at a cheap price, and raise their prices 10-fold, 100-fold. Many of these drugs are essential.
On Wednesday, Citron Research, a noted short-seller, questioned whether Valeant is a “pharmaceutical Enron” which sent the stock price down as much as 40% to $88.58. Valeant released a statement calling the report “erroneous”, stock price continued to drop. Valeant spokesperson said, "Citron’s false and misleading statements about Valeant appear to be an attempt to manipulate the market in an effort to drive down Valeant’s stock price." Valeant shares recovered somewhat in late trading after one of its major shareholders, Bill Ackman bought 2 million shares which result price up to $118.32.
However, the stock continued to drop more on Thursday, falling as much as 22% to $98.03 at its session low. Valeant’s latest slide comes after analysts at J.P. Morgan Chase & Co. and BMO Capital Markets downgraded their view on the company’s securities following allegations of improper accounting from a short seller, or an investor who is betting against the company.
Late Thursday, stock price went up to $110.21 after Valeant announced that it will host a conference call at 8 am EDT on Monday. Valeant said it would “lay out the facts” regarding allegations brought by short-seller Citron Research in a note on Wednesday. The report from Citron Research fanned concerns about Valeant’s accounting, raising questions about its use of certain pharmacies to supply its drugs.