giofranchi

No, of course I don't think so. That doesn't change my mind about how much reputation is important in business. And that you should defend it at all costs. Cheers, Gio

I have said this over and over again… But evidently you have chosen not to answer… Anyway, the truth is it simply doesn’t matter how durable VRX’s products are or are not, as long as we see organic growth. Because, as long as we see organic growth, their existing businesses are worth more not less than what they were worth when purchased. And amortization of intangibles is not a true expense. Now that there is no doubt VRX’s sales have not been artificially inflated, I believe reported organic growth is legitimate. You might believe future organic growth will peter out and become nonexistent... That might be your business judgment, mine is simply different! Cheers, Gio

Pete, of course you'd be right in most cases… But this is no “business as usual”… Here reputation is at stake. Ask WB how much he thinks reputation is worth… because in an economy that is solely based on trust, if people call you a liar, and you don’t answer firmly and convincingly, you are out of business. Period. And if you are out of business, you won’t be able to show how much cash you generate over time! This being said, I think the conference call and the presentation were good. Of course, page 47 of the presentation is particularly relevant to me. Cheers, Gio

I agree. And I think that might be a good move. But I still would like to see Pearson deeply involved with this. He is the person we all are looking at to find a way to navigate these troubling waters. I want to see him facing this situation with the same relentless strength he has shown building his company. Cheers, Gio

Maybe… But would you define this environment “business as usual”? All I am saying is I would like to see Pearson deeply concerned and involved in proving all the accusations unfounded… Then he could go on with his M&A strategy! Am I asking too much? When someone call you a liar, shouldn’t it be your first priority to reply and convincingly prove you are not a liar? Cheers, Gio

http://www.prnewswire.com/news-releases/valeant-pharmaceuticals-confirms-appropriateness-of-accounting-appoints-ad-hoc-board-committee-to-review-philidor-300165850.html I don't like it... "will help free management to focus on continuing to serve doctors and patients and run our business?... Really?! In such a climate of uncertanty for shareholders?? ??? Cheers, Gio

Interesting, thanks +1 Cheers, Gio

Sure! No problem. I'll send you a PM. Cheers, Gio

wellmont, if they won’t be able to answer all the questions today, I want another conference call tomorrow, and if other questions are raised, I want yet another conference call the day after tomorrow, and the day after that, and so forth. There is nothing else Pearson should do or be thinking about except defending his shareholders’ interests. And to do that, he needs to devote every minute of his time to responding to ALL THE QUESTIONS. It doesn’t matter how much time is needed! He should do nothing else except setting the record straight. You have tweeted a few hours ago the following: “after 325 pages of vrx discussion on a forum I still don’t know if it’s a fraud or not”… And that’s precisely why Pearson should devote all his time and energy to this topic alone, until there is no doubt anymore! No one knows VRX like Pearson does: if accusations are truly unfounded, he must be able to prove they are false. Any other behavior is not acceptable imo, and I will not accept it. Cheers, Gio

In general +1, that is usually the case. Could be somewhat different this time... usually a large cap like this will correct more quickly in the right direction than say a Fairfax years ago. Also, this is a lot smaller chunk of the business which is under pressure - in fact its miniscule. Instead of years to reprice, it may be quarters (or who knows, maybe less time given large cap and the problem areas are small parts of that large cap). I am pretty sure someone, say Philidor, is cutting some corners somewhere - but that is a whole different thing than VRX being Enron. FFHWatcher and OM, I agree it might take lots of time before VRX could regain the trust of the public and the market. But that was not what I meant. Instead, I would like to see what's needed for me to be sure enough there has not been any wrong doing, and Pearson has always acted in perfect honesty towards both VRX's clients and VRX's shareholders. This is all I am interested in right now. We have seen a bunch of guys making serious accusations and threatening VRX's shareholders investment. What I want to see from the management of a company I own is they work hard to defend their shareholders' interests. And to do so, they now need to respond publicly to any accusation of fraud. And must do it very convincingly and very clearly, as I have said. This is what I am looking for on Monday. If I think Pearson & Co have defended my interests clearly and convincingly enough, I'll keep my investment and I might even consider buying more. Otherwise, it will be a disappointment. Cheers, Gio

I think all the above is wrong. The only thing that matters to me right now is that on Monday Pearson adresses convincingly once and for all this issue: has VRX cut the corners somehow? I don't think so, but I need him to be very clear and convincing. Cheers, Gio

Bottom line, Pearson at best got caught with his hands in the cookie jar and at worst has lost all credibility and we're in the midst of gradually figuring out just how many cockroaches there really are. Ackman's 2010 book might prove to be perfectly named. Well, I don't see any need to keep repeating these things over and over again at this time: on Monday we will finally know for sure!? Cheers, Gio

I agree. But I still don’t think the freefall in stock price has been due to valuation (like you seem to believe). And I still think that, if VRX definitely proves it is not a fraud, it could be trading for 15-18x FCF for many years in the future, and in the meantime keep growing its FCF at high rates. If you sell at 15-18x, you’ll end up leaving lots of money on the table. This of course is theory… Because, the only thing that matters now is that VRX gains back the confidence of the public and institutional investors. Will it ever succeed? We will see. Cheers, Gio Also I think your way of valuing VRX on a balance sheet basis is not correct. Of course I think the businesses they have bought are much more valuable now because of: 1) Fat cut to the bone, 2) Better and much larger sales channels, 3) A better focus on marketing, 4) The good use of synergies, 5) A much lower tax rate. But you simply cannot take all the capital they have deployed, estimate how much the businesses they have purchased are truly worth now, take out all the debt, and arrive at a FV for VRX... Because that completely misses future opportunities. And I guess the first idea all longs have is they have invested in VRX because of Pearson's ability to find good investment opportunities in the healthcare sector!... Your balance sheet valuation would be like valuing VRX based only on its future organic growth, while we longs believe organic growth is good and necessary, but most of the value will still come from new acquisitions in the future. Cash EPS is the best metric to value VRX: look for which cash EPS multiple other pharma companies with the same rate of growth are selling for, and adjust that multiple for the heavier debt load VRX has right now. I have still to see a better valuation model!? Cheers, Gio Gio, I limit my valuation to the tools I am comfortable with. I did the fcf/ cash eps and b/s valuation and got pretty much in the same range. I did it last year and this year and my valuation moved only a little bit, which makes sense because in a normal business not much can change in one short year. My range is still 120-150 depending on how serious the regulatory risk and its impact on growth is. Anyway, I don't think you can base your valuation on future deals Pearson might make. A lot depends on the price paid, execution, integration and general business luck. You can't assume he will always get things on cheap and execute perfectly. The business environment also is subject to cycles... Btw I am a long too now, so I take offense at leaving me out when you talk about " us longs" ;) I simply try to buy below my valuation and sell above. I wait for margin of safety on either side with a bias towards holding the stock long. Right now I will buy below 100 and sell above 250... Just making a market here with a decent spread. You may disagree with my methods. It works for me so I follow it.. Well, Pearson has said that when VRX was selling around $115 last year, it was wildly undervalued. Now we also have Salix, bought at a very attractive price and which is performing in line with expectations. I was trying to say why I think a valuation based on VRX balance sheet, and which arrives at a FV slightly above $120 might not be how Pearson thinks about VRX. Of course the way you are thinking about VRX might be working very well for you right now, but it doesn't mean it is correct. Another possibility is that Pearson is dishonest and only wants to pump the stock price up... Cheers, Gio

I agree. But I still don’t think the freefall in stock price has been due to valuation (like you seem to believe). And I still think that, if VRX definitely proves it is not a fraud, it could be trading for 15-18x FCF for many years in the future, and in the meantime keep growing its FCF at high rates. If you sell at 15-18x, you’ll end up leaving lots of money on the table. This of course is theory… Because, the only thing that matters now is that VRX gains back the confidence of the public and institutional investors. Will it ever succeed? We will see. Cheers, Gio Also I think your way of valuing VRX on a balance sheet basis is not correct. Of course I think the businesses they have bought are much more valuable now because of: 1) Fat cut to the bone, 2) Better and much larger sales channels, 3) A better focus on marketing, 4) The good use of synergies, 5) A much lower tax rate. But you simply cannot take all the capital they have deployed, estimate how much the businesses they have purchased are truly worth now, take out all the debt, and arrive at a FV for VRX... Because that completely misses future opportunities. And I guess the first idea all longs have is they have invested in VRX because of Pearson's ability to find good investment opportunities in the healthcare sector!... Your balance sheet valuation would be like valuing VRX based only on its future organic growth, while we longs believe organic growth is good and necessary, but most of the value will still come from new acquisitions in the future. Cash EPS is the best metric to value VRX: look for which cash EPS multiple other pharma companies with the same rate of growth are selling for, and adjust that multiple for the heavier debt load VRX has right now. I have still to see a better valuation model!? Cheers, Gio

RBC Capital Markets Says Buy These 5 Pharmaceutical Stocks, Despite 'Irrational' Sell Off http://www.thestreet.com/story/13334553/1/rbc-capital-markets-says-buy-these-5-pharmaceutical-stocks-despite-irrational-sell-off.html?utm_content=buffer546e6&utm_medium=social&utm_source=twitter.com&utm_campaign=eb Cheers, Gio

I also added some today. But I am waiting for monday's call, before adding even more. Cheers, Gio

Very good presentation. Cheers, Gio

How Apple Could Make $1 Billion for Carl Icahn If His New Super PAC Succeeds http://www.thestreet.com/story/13333271/1/how-apple-could-make-1-billion-for-carl-icahn-if-his-new-super-pac-succeeds.html?utm_content=buffer23889&utm_medium=social&utm_source=twitter.com&utm_campaign=eb Cheers, Gio

I hope next monday we will finally know. http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Pharmaceuticals-To-Hold-Investor-Conference-Call-On-October-26-2015/default.aspx Cheers, Gio

I understand you don’t like debt. I don’t like it either. And I have always said so. But why? Because people make mistakes. And usually use debt to buy businesses that perform poorly. In the case of VRX I think the businesses they have bought are all extremely profitable, with net margins of 20%+, and I also believe Pearson knows the industry better than almost anyone else. Therefore, I have come to the conclusion that major mistakes have a low probability to occur. That’s why I don’t think debt is so dangerous here as it is in most cases. Of course, I might be wrong. We will see. Cheers, Gio

I agree. But I still don’t think the freefall in stock price has been due to valuation (like you seem to believe). And I still think that, if VRX definitely proves it is not a fraud, it could be trading for 15-18x FCF for many years in the future, and in the meantime keep growing its FCF at high rates. If you sell at 15-18x, you’ll end up leaving lots of money on the table. This of course is theory… Because, the only thing that matters now is that VRX gains back the confidence of the public and institutional investors. Will it ever succeed? We will see. Cheers, Gio

I don’t think I agree with this, Scott. Imo there are a lot of good ideas on this board. Just because the investment in VRX is giving us much trouble lately, it doesn’t mean the work done by many good investors on this board is to be completely disregarded and thrown away. Any single investment, even a “high conviction” idea, can turn out to be a wrong bet: of course there might be lessons to be learnt, but it doesn’t mean there is nothing good with this board anymore. Cheers, Gio

I agree 100%. Cheers, Gio

Yeah! I know... ::) Cheers, Gio

If it is, I have been fooled by Pearson and I will be ready to admit it. Cheers, Gio