UPDATE: Valeant Pharmaceuticals' stock has plunged between 20% and 30% in Wednesday morning trading, even dipping below $100 per share at one point. It is now trading at a 52-week low and has lost more than 55% of its value in the past month (and more than 62% in the past three months). 

The company is currently under siege over a federal probe into its pricing practices and news that the company may sell off its neurology unit and shift its approach to pricing. Media reports have revealed that Valeant uses the tactic of raising drug prices in order to make up for falling demand for drugs.

And to add to the woes, Valeant critic Citron Research (run by a noted short-seller) released a report alleging that the company uses a specialty pharmacy, Philidor, to create "an entire network of phantom captive pharmacies" to imply sales of drugs that are really just sitting in inventory. Valeant has yet to respond to the allegations.

UPDATE 2: Valeant issued a statement around 2 pm EST on Wednesday responding to the allegations and major selloff of its stock. The company addressed several claims from the Citron report, including the issue of several pharmacies that seemed to have the same phone number (hence the implication of "phantom pharmacies"), responding that there is a common call center number for the Philidor specialty pharmacy and other pharmacies in its network. 

Valeant also tackled the bombshell claim regading its inventory and accounting practices: "All shipments to Philidor and other pharmacies in the Philidor pharmacy network, including R&O, 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."

The company went on to say that "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."

As far as responses to a clearly uncomfortable situation go, Valeant could have done much worse. But investors are clearly still spooked, and as of press time, the company's stock is still down more than 25% on the day.

Dive Brief:

• Valeant has received subpoenas from the U.S. Attorney's Office in Massachusetts and Manhattan regarding its pricing strategy.
• In response to criticism about its pricing model, Valeant is contemplating several steps, including selling off its neurology business unit—a unit that relies on raising the prices of old drugs as a model.
• Valeant's stock is down 4.9% in Tuesday trading after CEO Michael Pearson discussed a revised pricing strategy.

Dive Insight:

Although all eyes have been on the Martin Shkreli-Daraprim pricing debacle, Valeant was already making headlines before Turing made its big pricing faux pas. On February 10, Valeant bought the rights to CVD meds Nitropress and Isuprel and increased the prices by 525% and 212%, respectively. This not only made headlines, but caught the attention of lawmakers, who started to pursue Valent for answers about how drugs are priced.

Now, Pearson has vowed to take steps to rein in price increases and revise its overall business model. Steps include spending more on R&D, pursuing fewer transactions based on drug prices, capping drug-price increases to single digits, and disclosing revenue growth from price increases versus volume. In addition, Pearson is considering divesting the neurology division.

While these moves may mollify lawmakers and represent a solid attempt to respond to public pressure, shareholders don't seem pleased. While the stock was down yesterday and continued to fall on Tuesday, overall it's down more than 25% since the beginning of the year (UPDATED ABOVE).