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Bill Ackman Defends Pershing Square’s Losses in Valeant Investment

BILL ACKMAN screen shot


From 2010, Valeant shares rose more than 10-fold to peak in August. Unfortunately, from a systemic perspective, just about every American is worse off as a result of Valeant’s strategy.

Still, Valeant isn’t looking to abandon the specialty pharmacy model. Other analysts have echoed similar sum-of-parts valuation arguments in defense of VRX stock at the current price.

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The drug maker seems to be drowned in debt. Many analysts have commented on the company rating. Valeant severed ties with specialty pharmacy partner Philidor RX in late October after revelations of Philidor’s questionable business practices and ties to Valeant surfaced.

“I think each of these events will be a confidence-inspiring event for the shareholders of the company”, Bill Ackman, CEO and founder of Pershing Square Capital, said Monday during a conference call. For 2015, Valeant’s free cash flow is expected to stand at $3.3 billion.

H&R Block, Inc. (NYSE:HRB) announced that its Board of Directors declared a quarterly cash dividend of 20 cents per share, payable January 4, 2016, to shareholders of record as of December 7, 2015. Valeant might only be able to pay up the debt payable till 2020, which totals up to $14.3 billion.

While Pearson reiterated that Philidor business only accounted for 7% of Valeant’s sales, it handled a larger percentage of dermatology drugs so the derm business will be significantly disrupted in the short term. R&O alleges that Philidor fraudulently purchased a 10% stake in it, and then used its credentials with insurance companies to fill expensive prescriptions with insurance companies and access states where it had been denied a license, namely California.

News that Valeant’s Philidor subsidiary was engaged in deceptive business practices – along with a scathing research report from Citron Research equating VRX to Enron – was the impetus behind the free fall. When interest rates rose, and companies couldn’t do the deals they did before, the conglomerates started to crash.

Goggins testified at Congressional hearings that investigated Johnson & Johnson’s recall of children’s Tylenol and other drugs in May 2010 and September 2010 before leaving the company in March 2011, the same time the Food & Drug Administration came to a settlement with McNeil. Moreover, it was also reported that several employees at Philidor are former Valeant employees. This increased the skepticism regarding Valeant’s so-called lack of knowledge of its own relationship with Philidor.

Contacting pharmacy benefit managers to assess any concerns they have about the cost of the company’s drugs.

Company CEO and Chairman J. Michael Pearson issued the warning during a conference call in which he tried to reassure investors the disruption would not prevent Valeant from weathering the financial storm that has erased almost 70% of the firm’s stock value in little more than three months. It also said that it would not seek to own this pharmacy as it considered with Philidor. This led to questions as to why Valeant was making all the announcements on behalf of Philidor. He later said that holding a second call on Tuesday was a “step in the right direction”.


This article was first published at Bills Insider, by Abel Hampton  



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