Liberty

Why do you think the stock is up right now? It's called the ERICOPOLY bounce. Either that, or it's just Eric's volume moving it up... :D

Great, thanks. Very useful. Had no idea Pearson's colleagues called Munger. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/msg240300/#msg240300 http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/msg222064/#msg222064 Can also infer a lot by the fact that ValueAct and Mason Morfit/Jeff Ubben handpicked him and worked with him for 7+ years, and they basically base their whole competitive advantage and built their fund around good governance, and these two guys are highly repected (both were on the board, Mason now back). On top of that, I've been listening to him speak for a few years on conference calls and at presentations, and after you've heard someone speak for hundreds of hours, see what they promise and what they deliver, you get a sense of who they are and how they think about things. That might be intangible and qualitative and subject to uncertainty, but that's how it is with humans... (btw, that's one reason I prefer audio to transcripts even if they take longer; I feel like I can better get a glimpse of someone's character if I heard them speak for a long time... might be just me, though. I usually go back to the transcripts, but only after I've heard the audio onces)

Icahn: http://carlicahn.com/aig-ceo-letter/

The company bought back 200,000 shares at $111.50 USD: https://www.canadianinsider.com/company?ticker=VRX

http://www.reuters.com/article/2015/10/27/valeantpharms-valueact-idUSL1N12R22220151027 ValueAct meeting top 10 vrx investors.

14bn in buybacks. Past 3 Qs were: 10bn, 7bn, and 5bn. Nice acceleration. CFO said that in constant currency, the fiscal Q4 growth would have been 8% higher. That's just incredible. In dollar terms, Apple's FX headwind is bigger than Google's net income...

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock. yes, yes, yes -- that's past growth. Doesn't count ;) I know, but people have been saying that for how many years now? Share count going down, Android users switching in good numbers, China still early in 4G roll out, relatively small number of existing user base has upgraded to the bigger screen phones, FX won't work against them forever... And next year we have the 7 with an external refresh, which always gets people more excited. I think returns should be quite satisfactory at a below 10x multiple ex-cash (which at some point their might be able to repatriate if the tax code changes). Yeah, that didn't come across -- but tongue in cheek. Ah, sorry, hard to differentiate between real and ironic comments sometimes... :)

Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock. yes, yes, yes -- that's past growth. Doesn't count ;) I know, but people have been saying that for how many years now? Share count going down, Android users switching in good numbers, China still early in 4G roll out, relatively small number of existing user base has upgraded to the bigger screen phones, early days of enterprise push, competitors at high end have lost brand power, FX won't work against them forever... And next year we have the 7 with an external refresh, which always gets people more excited. I think returns should be quite satisfactory at a below 10x multiple ex-cash (which at some point their might be able to repatriate if the tax code changes).

http://finance.yahoo.com/news/apple-reports-record-fourth-quarter-203000140.html Per share earnings only up 38%. Must be because last year was an easy comp. No-growth stock.

21 was the day of the Citron report, right? The company probably hadn't done whatever internal checks/investigation that they now think disproves the claims at the time. I'm sure he was confident in the business, but probably didn't have the new dossier about the integrity of the specialty pharma channel on his bedside table at the time. Now that they have it but haven't been able to make it fully public yet, they can't buy. Just guessing.

Maybe I am crazy but Pearson and board members on the call were making light-hearted jokes. Not exactly the behavior you would expect from fraudsters whose vast criminal conspiracy was just uncovered by a Lemon. --- Interesting article on drug pricing: http://www.cnbc.com/2015/10/27/merck-ceo-discussed-drug-prices-with-obama.html Drugs are only 10% of total health care costs. In many cases, they actually have negative costs to insurers (the cost of curing Hep C is much lower than treating a chronic condition). I know Valeant only sells dermatology and ophthalmology drugs, so they are evil. But I still find the political hysterics hard to fathom. What about the doctors who order completely unnecessary MRIs? Or the lawyers who get rich from sketchy malpractice suits? Or the hospitals that charge $1 million for treating a premature baby? The lawyers, doctors, and hospitals can go decades fleecing patients, medicare, and insurers. The drug companies often only have 10 or 20 years before all of their R&D and clinical trial work is given, for free, to generic competitors. The whole system is a mess but I'm not sure pharma deserves to be the poster-child. I don't really want to get into a moral debate, but I do believe this makes large cap pharma a dangerous investment. In theory, Valeant's strategy overcomes these challenges. But everybody hates the ugly duckling, not because they are wrong, but because they are different. The entire pharma industry is going to throw Valeant under the bus. /End rant A long time ago I read a book called Economics in One lesson. The lesson is: "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." The lesson can be generalized and applied to other things, IMO. For example, if you look only at drugs where prices are increasing but you don't look at those going generics - sometimes billions and billions of dollars worth - you are not getting the full picture. If you look at the absolute dollar spending on drugs but you don't look at population growth, aging, demand for healthcare, and number of new conditions being treated over time, you're not getting the full picture. Etc. If you only look at the drugs where VRX has increased (gross) prices by a lot, you don't get the full pictures, which includes hundreds of products with flat or only modestly increasing pricing. If you only look at the absolute percentage increase in a drug price but don't look at the context, you might not see how it is actually possible for drugs to be mispriced. For example, if your drug has competitors that are selling for much higher prices and they still sell and are considered good values, maybe your price is too low. If the alternative to your drug is many days in the hospital and hundreds of thousands of dollars in costs, maybe you are providing a lot of value and should capture some of that value. After all, someone somewhere has to determine a price for all drugs, the numbers don't come down from the sky... And we can probably assume that some drugs are mispriced, some too high, some too low. If someone has expertise in identifying mispriced drugs, buying them cheaply, and repricing them, that could be a good business. And it was, until recently... I'm not saying that all cases are like that and that some drugs aren't repriced too high, but to some people, any price increases are automatically bad while the huge price decreases from generics and competition are taken for granted. There's a lot of anchoring going on; if Isuprel and Nitropress had always been selling for current prices, it's probable nobody would bat an eye. But because at some point they sold for another price, that automatically makes that earlier price the correct one...

Well they can't comment on the R&O lawsuit (or the subpoenas for that matter). At the very least, I assume they probably have material information that refutes some of the more outrageous R&O allegations. Yeah, that's probably it. With these things, you always have one side that is all tied up with lawyers and the SEC while the other side can basically say anything as long as there's a "maybe" in there somewhere. They might also have a ton of audit materials for the spec pharmas from regulators and PBMs that shows compliance for which drugs have been shipped where from whom, and under which insurance coverage, etc. Probably not the kind of stuff you can release at a week's notice...

A bit cryptic.. I wonder what they refer to, and why it hasn't been released yet (maybe needed more time for lawyering on some stuff, or to have some external forensic accounting firm do a report on operations from the spec pharmas or whatever -- some of these things take more than a week): http://blogs.wsj.com/moneybeat/2015/10/27/what-wasnt-said-on-valeants-conference-call/

Well, look at who wrote that article...

Anyone else getting a really queasy feeling when Roddy Boyd, who's clearly working with the other shorts, writes under the name 'Southern Investigative Reporting Foundation' and gets quoted as that elsewhere? Maybe next Andrew Left can rebrand as the 'Public Foundation for Truth and Common Good' or something.

The figure you quote is for "clear toenail" with 0% impairment. Sounds like in light cases, the nail isn't damaged so if you clear the fungus, the nail is clear. In more severe cases, you have to wait for the nail to grow back for it to be clear. The efficacy number for testing fungus-free if 53-55%. Efficacy with "5% visible toenail impairment" is 23-26% Probably the kind of things that a doctor explains to patient (ie. you might not have a clear nail right away at the end of the treatment, but we'll test for the fungus, then you just wait for nail to grow, etc). http://www.jubliarx.com/efficacy-side-effects http://www.jubliarx.com/about-toenail-fungus "Treatment challenges: Additionally, the time it takes for a healthy nail to grow back varies from person to person. Even after the fungus has been eliminated, nail regrowth can sometimes take a year or longer." But hey, I'm not a doctor, this is just a bit of googling...

Sample size of 18. Wow. I'm sure that all the specialists who are prescribing Jublia just have no idea what they're doing and that the business will be killed by Vicks any time now. At least it only cost 40m to develop, so they've more than paid it back by now ;)

Thanks!

My theory: The stock was driven down by "tourists" in the stock all rushing for the exits on the same day in a panic. The small "cabal" of shorts probably started covering on Wednesday. The long term owners (VA, Ackman, Greenberg, Simpson) are too concentrated to materially add to their positions. All the momentum and growth players are gone. The value players are going to need some time to figure this out. So who was buying on Friday? People expecting a short squeeze on Monday. Who is selling Monday? PatientCheetah Apparently, we are not allowed to use this analogy, so I will use pseudonyms. It reminds me of a computer company, Orange, that I bought in 2013. It had a sentiment-driven crash as the ownership transferred from growth and momo players to value investors. Despite revenue growth, growing dividends, and a massive buyback, the stock didn't start working again until "Snow White" started tweeting about this "no-brainer". IIRC, that was about 4 months after the bottom. Still not convinced? Valeant's high today is $118. Orange's high is $118.13. To quote my good friend, Andrew Left, "These similarities are too close to ignore". There's definitely a structural lack of buyers right now (because they are already full to the gills), and there's definitely no lack of sellers; and if the shorts have any kind of firepower (pretty sure there are all kinds of hedge funds now involved on the short side), they'll use it on days like today to try to send a signal to the rest of the market. So many market actors judge things by price action that if you can get a lower price, people won't look at any details and just conclude "oh, so the company didn't deliver". But this only works short term; in the long-term, what will matter is if there's any evidence of the company doing something wrong that is material, and if the business keep performing well and increasing IV.

Hi Rishi, Do you consider your investments in MA/V (I don't remember if you own both or just MA) and PCLN, as well as GOOGL (I assume), to be exceptions? They don't seem to be particularly cheap.

Is Merkhet your real name? Valeant is clearly bothered. They said that will be one of the first, if not the first thing the special committee investigates. Is that a real comparison? If you think an online message board is a comparable situation, then... bless your heart, I suppose. It is certainly a weird thing, and I'm curious to see what they'll find there. But to jump from that to anything else is clearly premature, just like jumping from "they didn't disclose Philidor" to "it's a fraud" was. I'm pretty sure that if you put any big pharma (JNJ, Pfizer, etc) under the kind of microscope that Valeant is under, you'd find a few strange things in various corners of the company. Even Buffett said that he knew that there was stuff he wouldn't approve of going on at Berkshire (and then Sokol happened). The question is, how material is it? It seems legal for manufacturers to partner with and also to own distributors, so having Valeant employees asking about sales figures and such (probably working on making sure the companies were interfacing smoothly and that they could rely on them as a distributor) isn't in itself a problem. And if you want to hide something, do you really use superhero names but then walk around and give your real name and let everybody know that you work at Valeant? Something's weird, but it doesn't sound like a "smoking gun" (unless the definition of what that means has recently been changed...).

So we go from "the smoking gun" on the "pharmaceutical Enron" with "phantom pharmacies" that are "stuffing the channel" with "fake sales", trying to defraud a poor little "pharmacy that had never heard of them" to... what exactly?

Good call. As usual, there's quite a gap between the hysteria and innuendos and the reality. "WHY DIDN'T VALEANT DISCLOSE PHILIDOR WHAT ARE THEY TRYING TO HIDE OBVIOUSLY FRAUD AND CHANNEL STUFFING!" Actually, it's way below materiality threshold so no special reason to disclose at the time, specialty pharmacies are common in dermatology, sales are only booked when products are dispensed, and inventories are consolidatad anyway. Philidor has been through a ton of audits from PBMs, etc. "WHY IS R/O BEING ASKED FOR MONEY WHEN THEY NEVER HEARD OF VALEANT MUST BE PHANTOM PHARMACIES FRAUD ENRON" Actually, R/O received and paid 75 invoices from Valeant in just the past few months prior. Sometimes your distributors just don't want to pay you and you have to resort to lawyers to collect. Nice to see Mason Morfit back on the board. From the few interviews that I've seen, that man is wicked smart and thoughtful, and I doubt he'd go back in there unless he had complete confidence. Also probably a sign that ValueAct isn't selling or even thinking of selling.

http://ir.valeant.com/files/doc_presentations/2015/10-26-15-Investor-presentation-Final4.pdf Call in 10 minutes.

Interesting thread, probably old enough to not be faked. http://ask.metafilter.com/275605/Economics-of-my-prescription