11/02/2015 12:49 EST | Updated 11/02/2016 01:12 EDT

Citron Research backtracks on promise of bombshell report on Valeant

MONTREAL — Citron Research, the U.S. short-selling firm that set Valeant Pharmaceuticals in its sights, has backtracked on its promise to release a bombshell report Monday against the embattled Quebec-based drugmaker.

The company tweeted Friday that it would update a previously issued report on Valeant with information "dirtier than anyone has reported."

But its six-page report doesn't live up to that billing on the advice of lawyers, Citron said.

"For those of you expecting a 'kill shot,' you can stop reading here," the Citron report said, adding that it won't be making new allegations against Valeant.

"We believe it is not our responsibility to be the judge, jury and executioner of the company's deeds."

Citron alleged nearly two weeks ago that Valeant (TSX:VRX) set up a network of "phantom pharmacies" to fool auditors — allegations that Valeant CEO Michael Pearson said are "completely untrue." Andrew Left, executive editor with Citron, said he stands by the allegations in that report.

Valeant said it was not surprised that Citron's latest report contains no further allegations.

"Given that its last report was filled with demonstrably false statements about our business, we are not surprised," said spokeswoman Laurie Little.

"We will continue to focus on running our business in an honest and transparent manner and meeting our commitment to the patients who depend on our products and the doctors who recommend them."

Citron is not the only one criticizing Canada's largest drug company, whose shares have a taken a beating in the past couple of months, especially since questions surfaced about Valeant's partnership with Pennsylvania-based Philidor Rx Services to distribute its drugs. Valeant has since severed its relationship with Philidor, a mail-order company that accounted for 6.8 per cent of Valeant's revenues in the last quarter.

Berkshire Hathaway vice-chairman Charlie Munger called Valeant's practices of acquiring rights to treatments and boosting prices legal but "deeply immoral."

In an interview with Bloomberg, the respected value investor and veteran business partner of Warren Buffett said Valeant's strategy isn't sustainable.

Little said Valeant operates based on the "highest standard of ethics" that complies with accounting rules, regulations and laws.

She said the prices drug firms including Valeant set reflect the value of the products and hospital reimbursement rates. Valeant also has programs to help patients who can't afford higher prices to ensure they get the medications they need, she added.

Valeant's shares bounced back from days of losses, rising more than six per cent at $129.80 in Monday early afternoon trading.


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Ross Marowits, The Canadian Press