Pharma wars: upset stomach - FT.com It's not a good sign when a bowel medicine company feels bloated. Salix Pharmaceuticals, a drug company focused on gastrointestinal treatments, announced on Thursday that there was excessive inventory of its products in the supply chain, so that future sales will be depressed. Its shares fell nearly 40 per cent. The drugmaker is not particularly well known in its own right. However, it is a minor player in the Allergan/Valeant fight, the best merger melodrama going. Allergan had been chasing its own deal for Salix to fend off Valeant's unwanted approaches. Allergan has been ferociously resisting Valeant, but it would only go so far. Salix's accounting problems helped nix the tie-up. Pharma companies sell to wholesalers, not pharmacies. Wholesalers can, for whatever reason, take on too much inventory in one period, hitting manufacturer sales in the next. There have also been cases of "channel stuffing" in the drug industry, where companies oversell to wholesalers to pad their results. Allergan, to its credit, backed away when its due diligence made it nervous about Salix. But it need not resist Valeant quite so violently. Bill Ackman is loudly advocating for a tie-up; he owns 10 per cent of Allergan. Allergan has said that Valeant's serial acquisitions cover up weak growth and an unsustainable business model. In December, Allergan shareholders will vote on whether to replace the board of directors (a court has said Mr Ackman can vote his shares, despite an insider trading claim from Allergan). The latest rumour has Allergan courting another potential buyer, Actavis (Allergan, Valeant, and Actavis all have market values between $40bn and $65bn). Mr Ackman has called for an open auction of Allergan rather than exclusive talks with Actavis. And Allergan should welcome an auction. Due diligence would come with it, and if Valeant, like Salix, had problems, they would soon become obvious.