U.S. stocks are higher in early afternoon trading on Tuesday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) up 1.10% and up 1.13%, respectively, at 12:05 p.m. EST.

Embattled drugmaker Valeant Pharmaceuticals International Inc announced early this morning that it is instituting a 10% price reduction on certain of its prescription products as part of a new distribution agreement with Walgreens.

Normally, one wouldn't think lower prices are favorable for shareholders -- particularly when the company's business model is partially predicated on price increases -- but the market is signaling strong approval, sending Valeant's shares 14.77% higher at 12:05 p.m. EDT.

Why the positive reaction? The agreement with Walgreens demonstrates that Valeant is shoring up its relationship with pharmacies in the wake of the Philidor fiasco (Valeant has effectively shuttered Philidor). Furthermore, lowering prices will burnish Valeant's reputation and improve strained relations with regulators.

Valeant has a prime opportunity to build on today's positive momentum at tomorrow's Investor Day.

There is significant uncertainty concerning how badly recent events have impaired the company's earnings power; the range in analyst estimates for 2016 earnings per share is $11.93 to $16.81, according to data from Bloomberg.

Valeant has not provided guidance for 2016 adjusted EPS since 2014, but at the end of October, its forecast for next year's earnings before interest, taxes, depreciation, and amortization was $7.5 billion. Analysts are less sanguine, with the consensus estimate at $6.88 billion; they'll be eager to receive management's updated financial guidance tomorrow.

Bloomberg published a story on Valeant this morning that is getting less attention than the company's price cut press release, but that nevertheless details potential weaknesses in Valeant's governance that persist today.

At the end of October, Valeant announced that it had appointed a board committee to examine its relationship with Philidor to "review allegations related to the company's business relationship with Philidor and related matters." One of the directors on the new committee is Norma Provencio, a former partner at accounting firm KPMG, and Arthur Andersen (deceased), who chairs Valeant's audit and risk committee.

According to Bloomberg, between 2005 and 2007, Provencio headed the audit committee of a very small publicly traded company (2006 revenues of $190,000, with roughly a dozen employees) that ultimately failed under the weight of a government crackdown on fraud.

According to the SEC, Signalife had "no written accounting procedures" from 2006 to 2008, such that the perpetrators of the fraud were able to "circumvent the entire system of accounting controls, to the extent any existed." How a former accounting firm partner could have missed these shenanigans at such a small organization raises some uncomfortable questions regarding her competency. Signalife is an ugly black mark against Provincio's record as a director.

On a brighter note, another member of Valeant's investigative committee is G. Mason Morfit, president of activist investor ValueAct Capital. No one is doubting the degree of his motivation (and competence) to get to the bottom of things at Valeant.