Traders work on the floor of the New York Stock Exchange underneath a board showing the name of Valeant Pharmaceuticals shortly before the opening of the markets in New York on Oct. 22, 2015.LUCAS JACKSON/Reuters
DEAL OF THE DAY
Winnipeg pharma company files for Nasdaq IPO
Winnipeg-based pharmaceuticals company Viventia Bio Inc. has filed with the Securities and Exchange Commission for an initial public offering.
Viventia develops drugs for treating cancer. It is planning to list its shares on the Nasdaq exchange and is aiming to raise $86-million (U.S.). Viventia intends to use part of the proceeds to fund clinical trials on a number of its drugs.
Viventia's 85-year-old founder, Leslie Dan, is a pharma sector veteran. In 1964, he founded Novopharm (now Teva Canada Ltd.). Mr. Dan owns 99.4 per cent of the equity in Viventia and is planning to completely exit his position in the IPO. The company posted a loss of $6.5-million in 2014.
U.S. brokerages Leerink Partners LLC and Cowen and Company LLC are acting as joint book runners on the stock offering. SEC Filing
INSIGHT
No 'snapback' rally for Valeant
A common scenario after a steep selloff in an individual stock is the so-called "snapback" rally the day after.
Alas there was no such snapback for Valeant Pharmaceuticals International Inc. on Thursday. The stock got trampled all over again – down as much as 20 per cent at one stage, before ending the day 6.5 per cent in the red on the Toronto Stock Exchange.
On Thursday, a number of analysts weighed in on the sensationally-worded report put out on Wednesday by U.S. short seller Citron Research, which drew parallels between Valeant's accounting and Enron's. BMO Nesbitt Burns analyst Alex Arfaei slashed his target to $184.70 from $343.86 on Valeant and cut his rating on the stock to market perform from outperform.
Few analysts are buying the dire narrative propagated by Citron's Andrew Left hook line and sinker – that Valeant is storing inventory at Philidor, a Pennsylvania-licensed pharmacy company, and recording it as "phantom" sales. For its part, Valeant says shipments to Philidor are not recorded as consolidated revenue. Nonetheless, some analysts expressed concern that Valeant has been less than forthcoming about its relationship with Philidor.
"Despite the material amounts of sales involved, until Monday, [Valeant] had not provided clear disclosure about its interactions and accounting for Philidor. ... No disclosure was provided that Valeant had acquired a purchase option on Philidor in late 2014," Dimitry Khmelnitsky, an analyst with Veritas Investment Research, wrote in a note to clients.
Mr. Khmelnitsky estimates that $800-million in Valeant's sales flow through Philidor. Veritas has been a vocal critic of Valeant's business model for for some time and characterizes its accounting as "opaque." Veritas has had a sell rating on the stock since July, 2014.
On Monday morning, Valeant plans to hold a conference call in which it will detail its relationship with Philidor, address Citron's allegations of inflated sales and explain its accounting in more detail.
It's unclear how much Citron's Andrew Left personally stands to benefit from the ongoing downside in Valeant's stock, or whether he has already taken some profits on his position. But should the fact that Mr. Left has significant skin in the game make investors wary of his research?
"The short agenda is different than most average investors and their reports should be analyzed in the same way that other reports from Wall Street analysts – but they shouldn't immediately be written off as quacks or liars or cheats," Frances Horodelski, anchor at Business News Network (BNN), wrote in a note sent to colleagues on Thursday.
"The short sellers I have met or know tangentially are thoughtful, thorough and knowledgeable." Ms. Horodelski spent more than two decades on Bay Street in research, portfolio advice and investment banking. Story
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