Valeant Pharmaceuticals shares plunged 40 percent Wednesday after a report accused the Canadian company of inflating sales figures, which it denied doing.

Trading in New York was halted midday for a statement from the company. The stock rebounded somewhat after the company refuted Citron Research's scathing report, but was still down 17 percent at $121 in late trade,

Citron, a longtime critic of Valeant, had accused the company of creating a network of mail-order pharmacies to "stuff the channel" -- a deceptive business practice of inflating sales figures by sending retailers in its distribution channel more product than they are able to sell.

It said Valeant was using two firms it purportedly controlled -- Philidor RX and R&O Pharmacy.

"Something really stinks at Valeant and it goes beyond their egregious price hikes," Citron said, alluding to recent allegations of runaway drug prices spotlighted by lawmakers in the US Congress and Democratic presidential frontrunner Hillary Clinton.

In a statement, Valeant called the report "erroneous," saying shipments to Philidor RX and R&O Pharmacy are not counted in its financial results. "Sales are recorded only when the product is dispensed to the patient," it said.

Any inventories in the distribution network, Valeant added, are included in its consolidated inventory balances.