Troubled health care roll-up artist Valeant is like a bunch of “choir boys” when compared pharmaceutical concern Mallinckrodt, short seller Andrew Left of Citron Research said on CNBC Wednesday after the close, where he was confronted by the firm’s CEO.
Left was short and vocal regarding Valeant, says its the tip of the iceberg
Left is among a group of highly watched researchers who is perhaps best known for his short selling recommendations, particularly with regard to Valeant Pharmaceuticals. Left had talked the stock down before buying back his exposure.
On October 2, ValueWalk reported on a Citron research piece that claimed “Valeant’s business model is broken” and predicted that Congress, who was hearing testimony from Valeant, asked the right questions it would find troubling answers. At the time, Citron had a $125 price target on Valeant, a target that was then lowered to $50. The stock was trading near $262 per share on August 5th. Today Valeant traded at $33.54 after a disastrous conference call that nearly halved the company’s value.
Short seller Andrew Left asks questions that generally go unanswered
Now Left says Mallinckrodt is a worse investment, “because they are dependent on one drug that is close to 50 percent of their (profits),” he said, reiterating his call that the company was “the poster child for price gouging.” He said the firm could default on debt and the stock could go to zero, as MNK shares fell 9% Wednesday after shedding 14.5% on Tuesday.
While Left was lambasting the firm’s prospects and talking his short book, Mallincrodt CEO and President Mark Trudeau called into CNBC to confront him and support the firm.
Trudeau said Mallincrodt was a diversified company that is not like Valeant, disputing all Left’s claims. Left then challenged Trudeau regarding how much net revenue the company’s most popular drugs represented – to which Trudeau did not answer on this call. Left also challenged the fact that the FDA has not approved the $36,000 per vile drug in a double blind test.
There has been a lot of confusion regarding Mallincrodt’s business model,” Trudeau said, as he appeared to avoid Left’s issues.
“It’s ludicrous,” Left responded. “There is a complete underbelly to this business.” When Left asked if Trudeau was aware of the Mallincrofdt sales cycle – accusing the pharmaceutical company of buying lunch for potential patients at mid-American restaurants such as Applebees or Maggiano’s to encourage seniors to get insurance to pay for the expensive treatments –Trudeau appeared not to answer the question but instead addressed their drug portfolio diversification.
View the entire interview here.
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