Liberty

Mr. Schiller stated, "My time at Valeant has been incredible, and I am very proud of all that we have accomplished together. Although I am leaving to pursue new opportunities most likely in areas outside of a publicly-traded company, I look forward to working closely with Mike and the rest of the management team to ensure a seamless transition of my CFO responsibilities and to continuing to serve on the Board of a company with enormous potential to deliver even more long-term value for shareholders." http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Announces-CFO-Succession-Plan-And-Additional-Executive-Appointment/default.aspx

He's staying on the board, so there's that. He's not running away. Sounds like he wants to shift down a few gears. This kind of life can be exhausting, so probably just personal motivations. We might never know exactly.

Interesting tidbit about R&D on the call. Developing Jublia from nothing and putting it through regulatory approval cost Valeant $40m. Just this quarter, revenue from Jublia was $62m. Jublia launched 3 quarters ago (it did $3m in Q2 2014). Pretty good ROI...

Thanks for the link, Loganc. LMCA definitely wants to buy the rest of SIRI if at all possible. But here again, time is one their side, as the buybacks are helping them by increasing their stake. Maffei recently said that the last time they tried to buy SIRI, part of what made them do it was that the NAV discount of LMCA had closed significantly. I wouldn't be surprised if they tried again the next time this happens. Edit: That Deloitte guy starts out like a MBA fortune cookie ;) Edit 2: Not finding much that I like so far. Mostly skipping ahead to when Maffei speaks to see if he says anything interesting. Trivia: The Symantec BOX guy is wearing an Apple Watch. Edit 3: Interesting part around 40 mins in about the nature of technological change.

Was expecting The Onion :-\

There are many interesting dynamics at play. Part of the role of the Edition is to make the stainless steel watch seem less expensive. I bet that more people would have opted for the Sport if the Stainless Watch had been the most expensive model. This is a known effect; restaurants often have something ridiculously expensive on the menu to make you feel like you are picking something in the middle. Also, the gold Edition sold out in China within moment of being launched for pre-order. Culture matters. Nobody had been able to see one in person yet. Sometimes, making an obscene purchase is the point. Veblen goods and all that. And the Watch will have a different upgrade cycle than the phone. I suspect most people will keep their Watches 4-5 years, kind of like iPads, and not 2-3 years like iPhones (though they might buy different bands in between). The final split in units might be something like 1-2% edition, 60-70% sport, and the rest stainless. But the revenue and margin ratios will be very different, with the edition punching way above its unit weight (obviously, if each one costs 20-30x more). Gross margins on the gold Edition could easily be in the 80-90% range, IMO.

Ok, end of discussion, I think we can all agree on that.

Read this: http://www.mylan.com/news/press-releases/item?id=123304

Form factor probably won't change a lot because wrists are wrists. It'll get thinner for sure, but a lot of people seem to think it feels pretty good as it is, so it's not like a cellphone from the early 90s or anything. Most of the changes will be about aesthetics: More new bands, more finishes, maybe more metal types (titanium?). I can imagine limited time offer bands coming out and selling really well. Biggest changes will probably be internal, with more sensors, more battery life, faster SoC, maybe upgredeability of the Sx chip, etc. And of course, software improvements and more native apps after the SDK comes out.

Yeah, the price of making candy is probably only going up with inflation, while the price of developing medicine is exploding. But seriously, anything that has to do with medical treatment is a very sensitive topic. Everything should be free, right? But then, we wouldn't have anything much... Valeant has disclosed a lot about its pricing during the past year, and they don't focus much on pricing, they mostly grew through volume. But if you look at all their products, I'm sure you can find some like the one in that article that have gone up a lot; in this case, seems like they bought a product, and then rethought the pricing. That happens, sometimes there's untapped pricing power, just like sometimes prices fall through the floor when patents expire or a new better competing drug is introduced (but journalists don't write outraged articles about that). I think the important thing is to keep a broad view of the industry, rather than look for headlines because "OMG, how can a vial of this drug cost thousands of dollars?". Well, how much did it cost to develop? How much value does the drug provide? It's still a market, with all the pros and cons that that implies. Those who are worried about the high price of drugs should actually thank Valeant, because their lean approach is actually cutting a lot of waste. A lot of the price of drugs goes to pay for fat SG&A and unproductive R&D... "Never wrestle in the mud with a pig. You'll both get dirty, but the pig will enjoy it." "Never argue with a (retired) lawyer. You'll both get frustrated, but the (retired) lawyer will enjoy it." :) So, venturing off topic some more, if your argument is that it the cost of developing medicine is exploding, then since Valeant slashes R&D and doesn't actually do much development at all, shouldn't that price go down? :P In any case, I don't think anyone is arguing that Valeant (or any other drug manufacturer) should be doing its work for free. My comment was merely to point out that there are significant situational differences between raising prices on candy and raising prices on medicine -- people can come out differently in terms of deciding on the morality of one or the other, but it would take some tortured logic to say that the situations present no differences. Valeant didn't develop that drug, they bought it, and then repriced it. For the vast majority of their portfolio, they don't seem to take more pricing than other pharmas. In fact, a lot of what they sell is OTC or branded generics, and they don't have too much pricing power. It's also not true that Valeant doesn't do R&D. Look at their pipeline and product launches, they have lots of new products. They just do it in a different way and focus on different things than the traditional model in the industry. I didn't say there was no difference between candies and drugs, btw. Just tried to explain that it was more complex than "higher prices = bad".

Tom, how do you know if the drug was too expensive after the price hike rather than not expensive enough before? How do we find the right price? Is lower always better? Maybe people with certain diseases are best served over time if there's a profitable drug for their condition that attracts more other companies and generic makers. If there's just one low-profit or unprofitable drug, they probably won't get new better drugs over time, and generic makers probably won't rush to make generics when patents expire. I don't know if it's the case in this particular situation, but I know that short-termism isn't just bad for stocks. Some people might prefer lower prices today, but maybe many more people would be helped with more interest in that therapeutic area. There's a balance somewhere between these tradeoffs. I don't pretend to have the anwer, but I know it's not as simple as "any price increase is bad".

I think one of the main fallacies that Valeant has to fight is that people have the mistaken belief that $1 of R&D equals $1 of R&D anywhere. That's BS. Historically, Apple spends a small % of revenue in R&D compared to many other tech companies. Some tiny biotech startups found billion dollar drugs while some of the largest pharmas in the world struggle to discover new things. Two labs that have the exact same budget could be night and day when it comes to productivity and talent. What matters is how smartly you do the research and the results, not how much money you pour down that hole... For example, Valeant keeps a smaller R&D staff and outsources a lot of R&D to external labs that have overcapacity, so they pay a lot less to do the exact same thing (they get the marginal cost and don't have to pay the fixed costs when a project is over). This reduces the dollar amount, but not necessarily the results, yep people who short-hand it to just a dollar amount would say that this is bad.

I'm venturing way off topic at this point, but I would say that price hikes on medicine is a tiny bit different than price hikes on candy... Yeah, the price of making candy is probably only going up with inflation, while the price of developing medicine is exploding. But seriously, anything that has to do with medical treatment is a very sensitive topic. Everything should be free, right? But then, we wouldn't have anything much... Valeant has disclosed a lot about its pricing during the past year, and they don't focus much on pricing, they mostly grew through volume. But if you look at all their products, I'm sure you can find some like the one in that article that have gone up a lot; in this case, seems like they bought a product, and then rethought the pricing. That happens, sometimes there's untapped pricing power, just like sometimes prices fall through the floor when patents expire or a new better competing drug is introduced (but journalists don't write outraged articles about that). I think the important thing is to keep a broad view of the industry, rather than look for headlines because "OMG, how can a vial of this drug cost thousands of dollars?". Well, how much did it cost to develop? How much value does the drug provide? It's still a market, with all the pros and cons that that implies. Those who are worried about the high price of drugs should actually thank Valeant, because their lean approach is actually cutting a lot of waste. A lot of the price of drugs goes to pay for fat SG&A and unproductive R&D...

That's exactly what I meant. There's a spectrum, and Malone is probably on one end, and old Yahoo is probably on the other, or something like that. Everybody seems to pick exactly where they are as the sweet spot, and anyone who's farther along than them is going too far. But many people (the media's full of that crap) are blaming Berkshire for minimizing their taxes in all kinds of ways while Buffett writes op-eds about taxes on the rich being too low. I'm not saying Munger's wrong, just that him not considering an inversion doesn't mean that inversions are somehow morally wrong, or that Munger has picked exactly the right spot on the spectrum and that nobody should go farther. The US has attracted a lot of companies from other countries because it is/was more competitive in certain ares; now other countries are attracting companies from the US because the US isn't competitive in the area of corporate taxation for global businesses. Was it wrong when the US got foreign companies to move to it because it offered a better deal?

I guess he draws the line exactly next to all the things Berkshire has done over the years to pay as little tax as possible ;) The US tax code is broken, it's stupid to double-tax foreign income that has already been taxed elsewhere. If a wave of inversions helps push for reform, I'm all for it. It's entirely legal to merge with a foreign company, and companies that are already outside the US have all the benefits of an inversion, so it would be less fair if US companies couldn't move out.

SIRI Q1: http://investor.siriusxm.com/releasedetail.cfm?ReleaseID=909034 FCF/share up 36%!

Never had cable for TV, though I have it for the internet (ISP is Teksavvy). Keep in mind that this forum is extremely not representative of people in general (we're all INTJs for crissake), so you might want to be careful about extrapolating from it. Most people I know have cable and probably watch multiple hours of it per day. Especially bad for those who are into sports (mostly Hockey around here).

From twitter: "Apple had a better March quarter this year than it had a holiday quarter in 2013. March is the new Christmas."

Yep. Margins should be a bit lower in the next quarter or two because the Watch will take a bit of time to ramp up and get better yield and product mix that matches demand more closely (and for gold Edition to ship -- even if it's only 1 or 2 percent, it could represent a significant chunk of revenue for that product), and because Apple overall is fairly seasonal and loses leverage at this time of year. I think that once the Watch is more mature, gross margins on it should be higher than company average. I wouldn't be surprised to see them above 50-60% when you include accessories (bands).

Five minute interview with Greg Maffei: http://video.foxbusiness.com/v/4199291096001/liberty-media-ceo-industry-facing-pressure-to-scale-and-unbundle/?#sp=show-clips It's funny when she asks him about Time Warner cable, he's speaking for Liberty Media, so he says they wouldn't be interested. But of course broadband and charter is another story ...

http://www.apple.com/pr/library/2015/04/27Apple-Expands-Capital-Return-Program-to-200-Billion.html http://www.apple.com/pr/library/2015/04/27Apple-Reports-Record-Second-Quarter-Results.html 61.2m iPhones! GM at 40.8%. Only 20% of iPhone base has upgraded to iPhone 6 and 6 Plus. iPhone ASP $659, increase of $62 YoY Dividend increased to 52 cents.

Charter only buyer?

So many things wrong here. Anyway, think what you want.

What happens when Berkshire has bought all the companies in the world? This is a pointless question, but I think I see what's your underlying criticism, and it's about the R&D, right? Valeant says that big pharma isn't very good at R&D, and the numbers tend to show it. Small biotechs and smaller companies are better at that (less bureaucratic, more nimble, more focused, etc). It's a bit like how in mining there are juniors taking more risks and majors who buy juniors when they find something, providing more capital to develop/commercialize assets and an exit for shareholders. Demand for drugs and cures isn't going away, and as long as there's demand, supply will try to meet it because that's a way to make money. That's not going away. What might change is the configuration of the industry. Who's best equipped to do what? I think some big pharmas might want to specialize in R&D and keep doing it well (Allergan has a pretty good track record), or some that operate in certain therapeutic areas might need to keep cranking it because big blockbusters are needed all the time, but that's not where Valeant plays (skin creams and contact lenses, OTCs and branded generics). I think the capital that is being wasted on unproductive R&D at many big pharmas could be better used either in more productive R&D elsewhere in the industry (smaller companies or R&D specialists) or in other areas of the economy, and we'd all be better off with less wasted resources. Another point is that Valeant isn't against R&D. They have a pretty full pipeline that compares well with many other companies. They just are much leaner about it; what matters is results, not how much money you spend creating them (f.ex. Allergan management was getting bonuses based on how much was spent on R&D rather than on R&D results).

Sure, I give Munger tons of credit, he's one of my heroes. But in this case I think he's wrong. As for Valeant, they just spent a long time without making significant acquisitions while the Allergan saga was going on and organic growth accelerated and non-GAAP financials converged to GAAP. They're not just some 60s-style conglomerateur that buys random stuff to pile it on (like Munger's example, ITT) and hide a deteriorating business with complex accounting. Valeant has complex accounting because they do a lot of acquisitions and restructuring, but they do everything they can to allow people to see what's going on, unlike companies that are trying to be obaque, and their non-GAAP adjustments are standard for the industry (as Ackman pointed out -- he knows a thing or two about accounting, as does ValueAct and Sequoia). They have a very clear strategy, an area of expertise that they stick to, structural advantages, and a decentralized model that makes them closer to Capital Cities or TCI than to ITT.