Valeant Gets Continued Boost After Ex-Bear Left Changes Mind

Shares of Valeant Pharmaceutical (VRX)  closed Tuesday up 7.5%, extending their two-day rally, after reports that the struggling Canadian drugmaker's most notorious short-seller has reversed his stance.

Real Money was first to report Monday that Andrew Left, who heads online publication Citron Research, has scrapped his bear position on Valeant in favor of a long position, hedged with some put options.

Valeant shares are up more than 16% since Left -- who helped drive Valeant shares into a tailspin last fall through a series of Citron reports -- made his trading strategy public.

It appears Wall Street has begun to follow Left's perspective on Valeant as a sort of market bellwether, largely because of the accuracy of his forecasts last fall, in which he equated Valeant to a "pharmaceutical Enron."

Left had said in his Citron reports that he anticipated Valeant shares would be crushed by onerous regulatory probes into severe price hikes on some essential drugs, as well as into its bookkeeping tied to its former relationship with mail-order pharmacy Philidor. Valeant has since admitted to $58 million in improperly booked sales tied to the partnership, and shares have fallen 71% in 2016 alone.

Valeant announced Monday it will broaden discounts on two of its drugs, Nitropress and Isuprel, in order to help its new CEO, Joseph Papa, refurbish the company's image as a patient-first drugmaker. But Left told Real Money that investors should be paying closer attention to sales of its flagship product, Xifaxan, which was obtained as part of Valeant's $11 billion acquisition of Salix last April.

"I don't think they're going to make any decisions that are going to torpedo their company," he said of Valeant's announced strategy to cut prices on a variety of its products in part to build confidence in its customers and shareholders.