`
`October 21, 2015
`
`
`Valeant: Could this be the Pharmaceutical Enron?
`
`Citron Publishes the Smoking Gun!!
`Price Target lowered to $50
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`
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`Just four days ago in the world of Valeant, no one had ever heard of Philidor RX.
`Recent concerns about the company focused on its unsavory business practices of
`massive prices raises on pharmaceuticals acquired in a rapid succession of
`acquisitions, while slashing research and development. But no one had discussed
`how these drugs were distributed….until this week.
`
`
`On Monday morning before earnings, a report came out of SIRF, uncovering
`undisclosed relationships with specialty pharmas, namely Philidor RX. Most
`importantly, the article introduced Wall Street to a court filing made by a
`company called R&O Pharmacy, filed with the California District Court in
`September, in which this small regional pharmacy claims it had received an
`improper demand for payment from Valeant to the tune of $69 million.
`
`Just yesterday, the New York Times increased its scrutiny on Philidor by
`questioning if its operation was the target of subpoenas recently served on
`Valeant over its pricing strategy, covered the prior week.
`
`This is Not Where the Story Ends; it is Where the Story Begins
`
`With its quarterly earnings report scheduled for first thing Monday morning,
`Valeant was well aware of the scrutiny that was about to come down on Philidor
`and the R&O lawsuit, as both SIRF and the NYT had contacted management.
`Valeant came prepared for the conference call with pre-written questions and
`answers -- one about Philador, and one about R&O -- in its slide deck. This is
`where the cover up begins.
`
`We will let the New York Times start:
`
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`Valeant and Philidor RX
`The Big Coverup
`
`October 21, 2015
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`Page 1 of 8
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`Page 1 of 8
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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1547
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`
`
`“Valeant had said little about Philidor until Monday, when J. Michael
`Pearson, Valeant’s chief executive, revealed on his company’s quarterly
`earnings call that Valeant had purchased an option to acquire Philidor late
`last year. He said that Valeant consolidated Philidor’s results in its own
`financial reports.”
`
`
`An option? To acquire a company to which you are the only customer? Why
`would Valeant, a major big cap pharma, a darling of the hedge fund crowd, a
`suitor of Allergan and an aggressive acquirer of pharmas like Salix, Bausch &
`Lomb, etc., etc., be secretly maneuvering to buy a little known pharmacy with a
`dubious ownership structure? And then consolidate its financials? Why was this
`entity NEVER disclosed in any prior company disclosure? (See Valeant Slides on
`Philador here.)
`
`
`
`
`What is being covered up??
`In the same slide presentation we read Valeant's explanation of a mysterious
`court document. R&O Pharmacy filed for pre-emptive relief in California District
`Court for having received a demand for $69 million from Valeant, stating it had no
`invoices from Valeant. Valeant's explanation was this one slide:
`
`
`So we are to believe that Valeant putatively owns Philidor and is acting as its
`"protector” in sending the demand letter to R&O for payment? The story seemed
`
`Valeant and Philidor RX
`The Big Coverup
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`October 21, 2015
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`Page 2 of 8
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`Page 2 of 8
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`a bit far-fetched, but it was somewhat plausible if you wanted to suspend all
`disbelief.
`
`
`
`But after a fair amount of due diligence Citron is about to post the line that should
`send alarm through all Valeant shareholders:
`
`
`Philidor Owns R&O Pharmacy.
`
`
`
`Citron believes the whole thing is a fraud to create invoices to deceive the
`auditors and book revenue. PHANTOM ACCOUNTS. Here is the reasoning.
`
`The Smoking Gun!!
`
`
`
`From the links below, it is obvious that Philidor and R&O are ARE THE SAME
`COMPANY AND SHARE MANAGEMENT. The two companies have the same
`patient privacy disclosure, in fact formatted identically, on both companies'
`websites. Note the R&O website refers to themselves as Philidor.
`
`
`
`
`Who? Who? Who?
`
`
`http://randopharmacy.com/downloads/ro_npp.pdf
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`
`
`Valeant and Philidor RX
`The Big Coverup
`
`October 21, 2015
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`Page 3 of 8
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`Page 3 of 8
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`http://www.philidorrxservices.com/downloads/philidor_npp.pdf
`
`
`(Yes we've archived these pages and will republish them in case the links are down by the time
`you click on them.)
`
`
`
`And look! The pharmacies -- R&O, in Camarillo California, and Philidor RX in Horsham PA,
`have the identical toll free number to reach their Privacy Officer (at the bottom.)
`Now that's some service!
`
`
`
`
`
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`http://randopharmacy.com/downloads/ro_npp.pdf
`
`http://www.philidorrxservices.com/downloads/philidor_npp.pdf
`
`If you dial the fax # on the R&O website and press 1, you will get
`Philidor RX. It does not stop at an R&O phone.
`
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`Valeant and Philidor RX
`The Big Coverup
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`October 21, 2015
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`Page 4 of 8
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`Page 4 of 8
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`And as if this isn't enough, it appears to Citron that Valeant/Philidor have created
`an entire network of phantom captive pharmacies ... the same privacy notice
`appears on several other "ghost ship" putative pharmacy websites.
`
`
`http://westwilshirepharma.com/downloads/ww_npp.pdf
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`http://saferxpharma.com/downloads/saferx_npp.pdf
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`http://orbitpharmacy.com/downloads/orbit_npp.pdf
`
`Oh, and as by mere coincidence, these all have the same Privacy Officer contact
`phone number: (855) 815-7688. And these domains were all registered on the
`same day! [ Click Here to See them all ]
`
`
`
`It is apparent to Citron that Valeant has created a network of “pharmacies” as
`clones of Philidor. Why do these exist? Citron believes it is merely for the
`purpose of phantom sales or stuff the channel, and avoid scrutiny from the
`auditors.
`
`
`How Can This Be, Citron ? Doesn’t the Head of the Audit
`Committee have Any Responsibility Here?
`
`Let us not forget that the head of the Valeant audit committee is Norma
`Provencio. Mrs. Provencio herself was a director of Signalife which was run by
`now convicted stock fraudster Mitchell Stein. She was in fact his close associate
`for years -- information now conveniently omitted from her biography. Mrs.
`Provencio’s integrity was first challenged by Bronte Capital in this posting you
`should read for yourself. Now the relevance of its full context becomes clear.
`
`Is this Enron part Deux??
`
`
`
`These similarities are too close to ignore. Does everyone remember during the
`Allergan takeover battle, when Allergan chose the words “house of cards” ? Look
`at the following similarities between statements by Valeant and those of Enron:
`
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`Valeant and Philidor RX
`The Big Coverup
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`October 21, 2015
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`Page 5 of 8
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`Page 5 of 8
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`Enron CEO Jeff Skilling, phone call with Fortune, 2/14/2001: "It is unfair to us and
`unethical if you don't take the time to understand our business... we are doing it
`purely right... people who raise questions are people who have not gone through
`our business in detail..."
`
`vs.
`Valeant Chairman, CEO Michael Pearson, investor presentation, 5/28/2014: "So
`again, it is unfortunate that Allergan has not taken the time to understand our
`business... There is a number of inaccuracies in the report that was put out
`yesterday... They are just factually incorrect..."
`
`Enron CEO Jeff Skilling, phone call with Fortune, 2/14/2001: "[Enron] is a very
`simple model... it is a logistics company, not a trading company."
`vs.
`Valeant Chairman, CEO Michael Pearson, Sanford Bernstein conference,
`5/28/2014: "[Valeant] is more like a professional services firm than a sort of
`traditional pharmaceutical company."
`
`Enron CFO Andy Fastow, meeting with Fortune, 2/15/2001: "[Enron's] disclosure
`is more complete than anyone's."
`
`vs.
`Bill Ackman, conference call hosted by Pershing Square, 7/17/2014: "I will also
`point out that Valeant gives massively more disclosure about its business and did
`so prior to this transaction than Allergan."
`
`Enron Chairman, Ken Lay, email to employees August 2001: "I have never felt
`better about the prospects of the Company... our growth has never been more
`certain."
`
`vs.
`Valeant Chairman, CEO Michael Pearson, 2Q 2014 earnings press release,
`7/31/2014: "As we look across the entire business, I have never been more
`confident about the growth trajectory across the entire company."
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`Valeant and Philidor RX
`The Big Coverup
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`October 21, 2015
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`Page 6 of 8
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`Page 6 of 8
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`This is just too much of an eerie coincidence
`
`Jeff Skilling Bio
`Experience running a business before joining Enron in 1990: 0 years
`Job before joining Enron: Head of the Global Energy Practice and Head of North
`American Chemical Practice of McKinsey & Company, 11 year tenure at McKinsey
`vs.
`
`Michael Pearson Bio
`Experience running a business before joining Valeant in 2008: 0 years
`Job before joining Valeant: Head of the Global Pharmaceutical Practice and Head
`of mid-Atlantic region of McKinsey & Company, 23 year tenure at McKinsey
`
`
`
`Citron has seen this movie before. In 2008, Arthrocare, a successful medical
`device company, was doing its dirty deeds through Discocare, an undisclosed
`captive "independent company". When Citron exposed the relationship,
`Arthrocare tried to make it all go away by announcing it was buying Discocare.
`At the time, virtually every investment banking house on the Street had a "buy" or
`"strong buy" on Arthrocare, and Goldman-Sachs had been engaged to "explore
`strategic alternatives". The entire thing began to unravel when Citron discovered
`-- and published -- that Arthrocare and Discocare -- ostensibly separate
`companies, had the same fax number.
`
`The CEO of Arthrocare is now doing 20 years.
`
`
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`While it is impossible for Citron to state for certain at this point, this has the
`distinct aroma of product being jammed into a channel. It had to have started
`small, and now it's just too big. "We have an option to purchase Philidor" is
`simply ... trying to put the genie back in the bottle.
`
`
` Conclusion
`
`
`
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`All truths are easy to understand once they are discovered; the point is
`to discover them……Galileo Galilei
`
`Citron Research has delivered the proof that something really stinks at Valeant
`and it is goes beyond their egregious price hikes
`
`Valeant and Philidor RX
`The Big Coverup
`
`October 21, 2015
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`Page 7 of 8
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`Page 7 of 8
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`All of a sudden, one thread unravels this whole web of deception. From the
`moment of the first public mention of Philidor, within 72 hours, Valeant is now
`holding an option to acquire Philidor and investors find out only in retrospect that
`Valeant has been consolidating Philador financials?
`
`Let's get the explanation -- Certainly Mr. Lay and Skilling had one all the way down
`to the trial -- and in which they still blamed the short sellers.
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`Extremely Cautious Investing to All
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`Valeant and Philidor RX
`The Big Coverup
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`October 21, 2015
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`Page 8 of 8
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`Page 8 of 8
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