Hedge Fund Questions Alleged Valeant Ties to More Pharmacies

The Valeant Pharmaceuticals International Inc. headquarters in Bridgewater Township, New Jersey.

The Valeant Pharmaceuticals International Inc. headquarters in Bridgewater Township, New Jersey.

Photographer: Michael Nagle/Bloomberg
  • Shares recover after declining as much as 5.1 percent
  • Drugmaker has been scrutinized over use of pharmacies

A hedge fund that has long been bearish on Valeant Pharmaceuticals International Inc. published a new list of pharmacies it said were probably tied to the drugmaker, briefly sending Valeant shares down Wednesday.

Valeant’s relationship with so-called specialty pharmacies has come under scrutiny by investors, lawmakers and regulators. The 78 pharmacies identified in a blog post by Sydney-based Bronte Capital have names that allude to chess moves or to Stephen King novels. The hedge fund has a short-selling position against Valeant that would let it profit on the stock’s decline, Chief Investment Officer John Hempton said in an e-mail.

In a post online, Valeant said that the allegations by Bronte contained “significant inaccuracies,” and that the pharmacies named by the hedge fund appear to have been formed on or before Aug. 18, prior to widespread questions about Valeant’s use of pharmacies.

Valeant shares fell less than 1 percent to $87.02 at the close in New York, after earlier sliding as much as 5.1 percent following Bronte’s blog post.

The drugmaker has drawn scrutiny for its relationships with mail-order pharmacies such as Philidor Rx Services that specialized in helping doctors and patients get access to Valeant drugs even when insurers declined to cover them. Valeant said last month it would cut ties with Philidor after Bloomberg News reported, citing former employees, that Philidor workers changed the coding on prescriptions so they could be filled with brand-name drugs instead of generics.

Philidor has said it only filled prescriptions with the drugs doctors and patients preferred. Valeant has an internal committee looking into its relationship with Philidor.

The people on registration documents for the pharmacies on Bronte Capital’s list are employed by Valeant, the hedge fund said, without providing details. One of the pharmacies, ELO Pharmacy LLC, lists a contact address for its members or managers in Horsham, Pennsylvania, which matches -- down to the suite number -- a business address used by Philidor. All of the companies were formed in Delaware, where limited liability companies do not need to disclose their ownership, according to C.R. McLeod, a spokesman for the Delaware department of state.

A Philidor representative had no immediate comment.

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