Scroll down to see a graphic of various companies tied to Valeant.
A web of companies tied to Valeant Pharmaceuticals International Inc.'s controversial mail-order pharmacy sales network is as complex as a high-level chess match.
In fact, many of the companies involved in the sales network are named after chess terms or references, an intriguing twist in the Valeant saga as the company battles allegations of shady sales practices and a plunging stock price.
At the centre of the controversy over Laval, Que.-based Valeant's use of specialty pharmacies to distribute some of its products is Philidor Rx Services LLC, based in the Pennsylvania town of Hatboro. Philidor refers to 18th-century French music and chess prodigy François-André Danican Philidor, who developed an opening move called the Philidor Defence.
The chief executive officer of Philidor – which Valeant has an option to buy – is Andrew Davenport, who seems to play some role or other in most if not all of the chess-named companies.
As well, Matthew Davenport – who "appears" to be Andrew's brother, according to an online database – is listed as a principal on most of Philidor's state registrations, according to a report by the Southern Investigative Reporting Foundation.
The SIRF report alleges that several states list Matthew Davenport, David Wing, John Carne and Gregory Blaszcynski as officers, and another company, End Game Partnership LLP (chess reference), as assistant treasurer.
But none of the above-listed principals work for Philidor, according to SIRF. They all, however, work for pharmaceutical marketing firm BQ6 Media, located just four kilometres from Philidor's head office, SIRF says.
BQ6 is a reference to two famous opening moves made by former U.S. grandmaster Bobby Fischer in tournament play. BQ6's motto on its website is "moves ahead." Matthew Davenport is listed on the site as a co-founder and managing partner. He and Andrew both served as CEO of BQ6.
SIRF says an online search of End Game Partnership – in turn owned by End Game LLC of Las Vegas – results in a match to a house in Horsham, Pa., owned by Andrew Davenport.
Meanwhile, Philidor owns Isolani LLC, which was created in 2014. In chess, Isolani refers to an isolated queen's pawn.
Isolani in turn owns 10 per cent of California-based R&O Pharmacy LLC and has an option to buy the remaining 90 per cent of the company. Philidor is involved in a legal battle over billing with R&O's Russell Reitz. U.S. short seller Citron Research alleges that Philidor used R&O to book "phantom sales" while Mr. Reitz alleges that Philidor used R&O's credentials to ship product without a licence.
Philidor was denied a licence to operate in California last year after authorities said it did not truthfully identify its owners and financial officers, according to U.S. investigative reports.
Another company in the Philidor orbit is Lucena Holding LLC. Lucena refers to an endgame move in chess. Lucena is the corporate entity used to acquire a stake in West Wilshire Pharmacy, another California-based company.
Another intermediary company on Valeant's game board is KGA Fulfillment Services Inc., created last year as a wholly owned subsidiary of Valeant and whose sole function, according to SIRF, is to take over Philidor. In chess, KGA refers to the famous King's Gambit Accepted move.
Valeant chairman and CEO Michael Pearson said on Monday that a review of the arrangement with Philidor by the company's audit and risk committee and board of directors found no irregularities; but – given that "other issues have been raised publicly about Philidor's business practices" – an ad hoc committee of the board is being set up to look into allegations related to the Philidor relationship and other matters.
1. Valeant Pharmaceuticals
Laval, Que.-based pharmaceuticals giant. It was recently Canada’s most valuable company.
2. KGA Fulfilment Services
Owned by Valeant. In a $100-million deal, KGA bought the right to acquire Philidor in the future. The letters can also stand for King’s Gambit Accepted – a popular opening sequence of moves in chess.
3. Medicis Pharmaceuticals
Acquired by Valeant for $2.6-billion in 2012. The origins of Philidor.
4. Philidor Rx
The mail-order pharmacy at the centre of Valeant’s recent fall. Also a reference to 18th-century chess player François-André Danican Philidor, who developed an opening move called the Philidor Defence.
Owned by Philidor; owns 10 per cent of R&O and has the right to acquire the remaining 90 per cent. Isolani is a chess strategy that isolates the queen’s pawn.
A California pharmacy started by Russell Reitz. Currently in litigation with both Valeant and Isolani.
7. Andrew Davenport
Chief executive officer of Philidor. Plays a role in most, if not all, of the chess-named companies.
8. Matthew Davenport
“Appears” to be Andrew’s brother, and has a role in some of the chess-named companies.
9. BQ6 Media
A pharmaceutical marketing firm; also, a reference to two famous opening moves by Grandmaster Bobby Fischer.
10. End Game
A company whose address matches that of a house owned by Andrew Davenport. Endgame refers to the final stage of a chess match.
Sources: Southern Investigative Reporting Foundation, Media reports