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VRX Rallies; No Additional Items for Restatement Identified

Valeant Pharma's (VRX) Ad Hoc Committee Completes Review; No Additional Items for Restatement Identified

(Streetinsider.com)

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) announced that the ad hoc committee of the board of directors (the "Ad Hoc Committee") believes that its review of various Philidor and related accounting matters is complete, and that it has not identified any additional items that would require restatements beyond those required by matters previously disclosed.

Given the completion of the review, Valeant's Board has determined to dissolve the Ad Hoc Committee and that the 12 independent directors on Valeant's Board, including the members of the Board's Audit and Risk Committee, will assume oversight responsibility for remaining work associated with the completion of the Company's current and restated financial statements and disclosures, as well as its assessment of related internal controls and remediation matters. As previously disclosed, the company intends to file its Form 10-K on or before April 29, 2016.

Robert Ingram, chairman of the board and chair of the Ad Hoc Committee stated, "We appreciate the efforts of the Ad Hoc Committee and its independent advisors over the past five months. After conducting more than 70 interviews and reviewing over one million documents, the Ad Hoc Committee has not identified any additional items requiring restatements beyond those matters previously disclosed. We believe it is appropriate to transfer responsibility for any continuing work to the Board's independent directors. We continue to work diligently and are on schedule to file our Form 10-K on or before April 29, 2016."

The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company's Form 10-K for the year ended December 31, 2015, which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016. The company believes that after giving effect to the restatement, it will have remained in compliance with all of the financial maintenance covenants in its credit facility at the end of each affected quarterly period.

(Streetinsider.com)

VRX 1H Chart 4/5

(click to enlarge)

The 1H chart shows that price has been trading more or less sideways in the past week, but there is still bearish bias from the prevailing trend. 

Today's announcement that there are no new items in the restatement might be a bandage for the bleeding, but the injury is still very significant. We will see when Valeant Pharmaceuticals announces its restatement by April 29. Before then, there is likely to be very limited upside.

Fellow blogger Chris Lau thinks we should fade the rally: Just Sell Valeant Pharmaceuticals

After the 29th (or whenenever Valeant files), we will see how the market feels about the restatement. Valeant obviously claims the filing will resolve them of any non-compliance. In my opinion, if VRX can hold above 30 after the official filing, it might go on a run. Otherwise, below 30, it is likely to remain pressured with still a lot of room to fall.