Valeant Pharmaceuticals International Inc. didn’t just pioneer a new way of running a drug company—it has an unusual way of accounting for one, too.
The approach flows in part from Valeant’s unconventional business model for a drugmaker, focused more on acquiring and selling drugs than on discovering them. As with its business, the Canadian company’s books look very different from those of its peers, appearing in some ways more complex and opaque.
Valeant’s accounting stands out for its heavy use of tailored earnings metrics that strip out a wide range of expenses; favorable accounting for its acquisition and research-and-development costs; and a less granular view of its business lines than rivals provide, analysts and investors say.
Drug industry iconoclast Valeant Pharmaceuticals has polarized Wall Street, delivering blockbuster share performance for years while also attracting vocal naysayers.
For years, even as some critics complained of Valeant’s complexities, investors didn’t seem to care, sending the stock up more than 1,000% over five years. Since August, though, shares have dropped—at one point more than 70%—as Valeant faced a barrage of questions including about its accounting, which it has defended, and its close ties to a mail-order pharmacy that for nearly a year it hadn’t revealed to Wall Street. Its shares closed up 16% Tuesday after the company announced drug pricing and distribution agreements with Walgreens Boots Alliance Inc.