Credit: Shutterstock photoValeant Pharmaceuticals International, Inc.VRX announced that along with R&O Pharmacy, LLC, it has requested the court to dismiss the litigation between the companies. The decision was taken after the two companies entered into a confidential settlement agreement to resolve all claims between them.
Although the terms of the agreement remain undisclosed, the resolution includes a payment by R&O to Valeant.
We remind investors that Valeant had consolidated Philidor Rx Services into a unit in Dec 2014, which also included R&O Pharmacy, LLC.
However, on Oct 6, 2015, R&O Pharmacy filed a complaint against Valeant in the U.S. District Court for the Central District of California. Through the lawsuit, R&O Pharmacy did not seek damages, but demanded a declaration of rights from Valeant that the former did not owe any duties or amounts to the latter.
Valeant received $18 million for all inventory shipped to R&O, which was later dispensed by R&O and reimbursed by patients or payors through the end of the second quarter of 2015. However, thereafter, R&O has not been cooperating with Valeant in disclosing the amounts that it has achieved on sales of Valeant's products.
Consequently, Valeant ceased the shipping of further inventory to R&O. Valeant has also estimated that R&O owed approximately $25 million, based upon the amounts previously reported for prescription dispensed and the estimated net sales value of inventory that Valeant still believes to be in possession of R&O.
We note that Valeant's relationship with Philidor Rx Services, a specialty pharmaceutical company providing back-end services like call center, claims adjudication, IT and logistics support, and compliance/HIPPA regulation guidance to other pharmacies, came under the scanner in Oct 2015 after it was alleged that the latter was urging pharmacy benefit managers to opt for expensive drugs over their cheaper generics. Consequently, Valeant terminated its relationship with Philidor, whereby it lost 20% of prescriptions and $250 million in sales in the fourth quarter.
Valeant currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Corcept Therapeutics CORT , Actelion Ltd. ALIOF and ArQule, Inc. ARQL . Each carries a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
