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Valeant Pharmaceuticals shares plunge after accusation of faked sales

valeant-pharmaValeant Pharmaceuticals International Inc. shares tumbled as much as 40%, cutting about $20 billion off market capitalization, after a short seller alleged revenue-recognition improprieties. Citron Research  claims that the company had a secret relationship with a subsidiary called Philidor and a customer of Philidor’s called R&O. Citron claims that Philidor and the downstream customer are one and the same, meaning Valeant is shipping product to a subsidiary and falsely claiming the revenue.

The firm alleged it has a “smoking gun” on Valeant related to its drug distribution and sales.

 Valeant  disputed the allegations calling the report by Citron erroneous.

“The timing of our revenue recognition by selling through the Philidor pharmacy network is actually delayed when compared to selling through the traditional wholesaler channel,” said the statement.

The Quebec-based drug company’s stock has plunged 42% this week alone.  Congress has started to investigate how it and other companies buy and then ramp up the price of drugs.

As many as 50 mergers and acquisitions helped push Valeant’s market value as high as $90 billion in August from less than $20 billion at the end of 2011, data compiled by Bloomberg show.

With an hour left in the trading day shares of   have recovered somewhat, down 13.85% to $126.35 on astronomical volume of 77 million shares. The average daily volume is 3.8 million shares.

About Valeant Pharmaceuticals International, Inc. (VRX)

Valeant Pharmaceuticals International, Inc. develops, manufactures, and markets pharmaceuticals, over-the-counter products, and medical devices worldwide.

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