NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) stock is down by 6.06% to $104.74 in early morning trading on Friday, after the company announced that it will sever ties with specialty pharmacy Philidor, which will terminate operations as soon as possible.
Philidor represented 6.8% of Valeant's total revenue for the 2015 third quarter, according to a statement.
On Thursday evening, CVS Health (CVS), UnitedHealth Group (UNH) and Express Scripts (ESRX),the three largest pharmacy-benefit managers in the U.S., cut ties with Philidor as well, according to the Wall Street Journal. Audits found that Philidor was not in compliance with its provider agreement, the pharmacies noted.
Last week, Valeant stock tanked following a report by Citron Research alleging that the specialty pharmaceutical and medical device company collaborated with Philidor to not only inflate drug prices, but also to create a network of phantom pharmacies to falsely inflate sales and avoid auditor scrutiny.
Valeant denied the claims.
"We understand that patients, doctors and business partners have been disturbed by the reports of improper behavior at Philidor, just as we have been," CEO J. Michael Pearson said in a statement. "We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility. Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right."
Valeant stock has lost more than half its value after coming under scrutiny in September, Reuters reports.
Separately, TheStreet Ratings team rates VALEANT PHARMACEUTICALS INTL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate VALEANT PHARMACEUTICALS INTL (VRX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 6.2%. Since the same quarter one year prior, revenues rose by 35.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- VALEANT PHARMACEUTICALS INTL has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALEANT PHARMACEUTICALS INTL turned its bottom line around by earning $2.67 versus -$2.62 in the prior year. This year, the market expects an improvement in earnings ($11.70 versus $2.67).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 82.0% when compared to the same quarter one year ago, falling from $275.40 million to $49.50 million.
- The share price of VALEANT PHARMACEUTICALS INTL has not done very well: it is down 14.68% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: VRX