DUBLIN, Ireland and LAVAL, Quebec—Both Allergan plc (NYSE: AGN) and Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) issued statements Wednesday, Oct. 21, 2015, following sharp declines in the value of their stocks. Valeant shares fell more than 35 percent on Wednesday following a Citron Research report, “Valeant: Could This Be the Pharmaceutical Enron?” that questioned how the company records its sales and its use of specialty pharmacies. Sales of the stock of Valeant’s competitor, Allergan, which fell about 6 percent on Wednesday, were halted by the U.S. Securities and Exchange Commission for about 15 minutes that morning.

The report on Citron Research’s stock commentary website challenges Valeant’s “undisclosed relationships with specialty pharmas, namely Philidor Rx.” The report questioned Valeant’s announcement in its recent quarterly earnings call that it had purchased an option to acquire Philidor late last year. The Citron report asks: “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?”

In response, Valeant issued a statement on Wednesday titled, “Valeant Pharmaceuticals Responds to Erroneous Report,” in which it refuted the report’s assertions. As part of its argument, the Valeant statement said: “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.”

Because the Citron Research report questioned the use of an unaffiliated specialty pharmacy, which then impacted shares in Allergan and other pharmaceutical companies, even though they weren’t directly named in the report, Allergan issued a statement on Wednesday asserting that it does not use specialty pharmacies. The Allergan statement said, “There has been recent and potentially distracting speculation regarding the use of specialty pharmacies for the distribution of pharmaceutical products by certain pharmaceutical companies. Regarding the commercial distribution of Allergan's products, the company does not rely on specialty pharmacies for the distribution of its products.”

Last year, after resisting a hostile takeover bid by Valeant, Allergan was acquired by Actavis PLC for approximately $70.5 billion.