The stock price partly recovered, but the market seed uncertain. It is apparent to Citron that Valeant has created a network of ‘pharmacies’ as clones of Philidor, the report says. 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. Shares bounced back a bit on a response from the Canadian company, which stated that it was not improperly handling inventory or using Philidor to bump up revenue numbers.Valeant’s relationship with specialty pharmacies came into the spotlight earlier that week, when a New York Times report raised questions about the company’s Philidor relationship. Late the week prior, Valeant received two federal subpoenas requesting information about Valeant’s patient assistance and financial support programs that specialty pharmacies help facilitate.In response, Valeant issued a statent saying: All shipments to Philidor and other pharmacies in the Philidor pharmacy network are not recorded in Valeant’s consolidated net revenue. Sales are recorded only when the product is dispensed to the patient. All sales to Philidor and Philidor network pharmacies are accounted for as intercompany sales and are eliminated in consolidation. They are not included in the consolidated financial results that Valeant reports externally. Any inventory at pharmacies in the Philidor pharmacy network are included in Valeant’s consolidated inventory balances—there is no sales benefit from any inventory held at these specialty pharmacies and inventory held at the Philidor network pharmacies is reflected in Valeant’s reported inventory levels.