VRX - Valeant Pharmaceuticals International Inc.

[Guest Grey512]

I am with Rishig on this

 

Using lots of debt to roll-up industries with highly predictable CFs is fine (e.g. Malone in cable, for decades).

Doing it in industries where maintaining CF headroom depends on navigating price rises/gouging, exploiting the insurance/PBMs/payor sector, and staying ahead of patent cliffs - another matter.

 

For a long time the consensus was that Pearson/VRX invented a better mousetrap. There's probably a kernel of truth and effectiveness in what they were doing but just like in their general approach to doing business (and communicating with the market), they've gone too aggressive.

[ourkid8]

How about B&L which account for 21% of sales? That will actually grow considering we cut ties with Philidor and management will potentially spin-off the Neurology unit.  If MP can make some savy acquisitions, he can potentially delever the company via that route as well.  There are lots of levers management has at it's disposal but I respect your views and opinion instead of the noise I have been hearing.   

 

Why would you say acquisition era has effectively ended? Short term, of course we all can agree.  In the next 1 -2 years once all the dust settles, additional compliance controls are in place, leverage decreases  etc... Why can't they go back to $2-5B/year in acquisitions?
 

There are too many cockroaches here.

• Their business model is unsustainable. Acquisition era has effectively ended. Without acquisitions and R&D, a pharma company is like a depleting mine whose assets deplete away. As drugs go generic, profits collapse.

 

- 3x debt / ebitda is what I would consider sustainable leverage for a company that has a long stream of reliable cash flows. Valeant is hardly one, but if it want to get there, with the current business of $4.5B in EBITDA in best case, it will take 3 years at minimum if expenses don't go up due to fines, increase in R&D, increase in SG&A etc.

- Interest rates may go up by then, and the arbitrage of paying up because you can lever up cheaply is not possible.

- Large acquisitions in private negotiated transactions by definition defy my intuition about value investing. Why is anyone willing to give up their asset for anything less than its worth. Are you acting on the transaction because you have so many motivated sellers due to some structural reason? Or is it because it's worth to you more than to the owner because of your ability to juice the asset. And hence you pay up. I argue that these games to juice up are not sustainable and don't really create any value in the long-term. 

- I have heard arguments that Valeant buys assets that are not patented but highly durable [like a Coke or Colgate]. That is complete bull in my opinion. Jublia, the foot nail infection cream, is really as durable as See's Candy? Are we saying that the doctor will prescribe Jublia and explicitly say "dispense as prescribed", so the generic equivalent is not dispensed by the unaffiliated pharmacy - because Jublia is such a durable brand ? May be its true, I have no expertise in this area to judge that. This is completely out of my circle of competence.

[ERICOPOLY]

It has been fascinating to see how everyone has jumped on the bandwagon to speculate without any basis and also the trolls like immediate consulting.

 

It's also fascinating to see "rational" people dismiss Reitz' allegations out of hand while standing behind Pearson.  What happened to giving people a fair trial for Reitz claims before finding Reitz guilty of bullshitting  ;)  Who is looking right past his fraud accusations and dismiss them without a trial, meanwhile asserting that people like myself are unjust to question Pearson's version without a proper investigation?  :-X :-X :-X

 

Reitz has "boots on the ground" and so far he's showing a sense of panic that he might be losing his license or worse over what's going on in the trenches.  His pretending not to know about who really owned him only makes him look even more panicked if you ask me.

 

Through the trail of breadcrumbs, Reitz seems to have left a couple of breadcrumbs to show that he is critically concerned about being implicated in a widespread fraud.

 

Through the trail of breadcrumbs, Pearson seems to go out of his way to keep what Reitz is actually saying from reaching shareholders.

[rishig]

How about B&L which account for 21% of sales? That will actually grow considering we cut ties with Philidor and management will potentially spin-off the Neurology unit.  If MP can make some savy acquisitions, he can potentially delever the company via that route as well.  There are lots of levers management has at it's disposal but I respect your views and opinion instead of the noise I have been hearing.   

 

Why would you say acquisition era has effectively ended? Short term, of course we all can agree.  In the next 1 -2 years once all the dust settles, additional compliance controls are in place, leverage decreases  etc... Why can't they go back to $2-5B/year in acquisitions?
 

There are too many cockroaches here.

• Their business model is unsustainable. Acquisition era has effectively ended. Without acquisitions and R&D, a pharma company is like a depleting mine whose assets deplete away. As drugs go generic, profits collapse.

 

- 3x debt / ebitda is what I would consider sustainable leverage for a company that has a long stream of reliable cash flows. Valeant is hardly one, but if it want to get there, with the current business of $4.5B in EBITDA in best case, it will take 3 years at minimum if expenses don't go up due to fines, increase in R&D, increase in SG&A etc.

- Interest rates may go up by then, and the arbitrage of paying up because you can lever up cheaply is not possible.

- Large acquisitions in private negotiated transactions by definition defy my intuition about value investing. Why is anyone willing to give up their asset for anything less than its worth. Are you acting on the transaction because you have so many motivated sellers due to some structural reason? Or is it because it's worth to you more than to the owner because of your ability to juice the asset. And hence you pay up. I argue that these games to juice up are not sustainable and don't really create any value in the long-term. 

- I have heard arguments that Valeant buys assets that are not patented but highly durable [like a Coke or Colgate]. That is complete bull in my opinion. Jublia, the foot nail infection cream, is really as durable as See's Candy? Are we saying that the doctor will prescribe Jublia and explicitly say "dispense as prescribed", so the generic equivalent is not dispensed by the unaffiliated pharmacy - because Jublia is such a durable brand ? May be its true, I have no expertise in this area to judge that. This is completely out of my circle of competence.

 

Thank you. I am trying to focus on what is knowable today.

 

Anything is possible. Question is "does what I am paying today leave me with a margin of safety for the wide distribution of outcomes". In my judgement, it was a no for me. But that is based on my circle of competence - I don't understand the drugs that B&L, Salix, Medicis make. If someone does and thinks that current enterprise value more than compensates for all the risks in the "unknowable" category (fraud, not a fraud, aggressive..), then sure. It is in my "too hard pile". Don't get penalized in this game for not acting.

[ERICOPOLY]

Reitz name is on the California license.  He's the one who is going to hang.

 

Pearson set things up so there was a veil of separation.

 

One guy refuses to keep going for mortal fear of being the one left holding the bag...

 

... the other guy without his name on the license and a mile of legal firewall in between wants to keep the show rolling along.

 

 

So you guys think Reitz is easy to ignore.  WTF?

[wisdom]

Eric, are you sure Pearson planned this whole thing or are we speculating?

 

I refuse to speculate and let my imagination run wild. Though, I have heard rumours that Pearson's footprints were also found on the grassy knoll in Dallas.

[ERICOPOLY]

Eric, are you sure Pearson planned this whole thing or are we speculating?

 

I refuse to speculate and let my imagination run wild. Though, I have heard rumours that Pearson's footprints were also found on the grassy knoll in Dallas.

 

What does the phrase "trail of breadcrumbs" suggest to you?

 

therefore...

 

why ask me if I'm sure Pearson planned the whole thing...

 

What we do know, however, is once a secret network of pharmacies was uncovered along with a $69m receivables dispute with R&O, we were told it was "just a standard collections dispute".

 

Days later every partner of Philador severs ties and the thing has to be unwound.

 

All because of some jerk named Andrew Left with a reputation of pumping and dumping?

 

Yeah right...

 

And meanwhile there really is a guy who is terrified of losing his license due to what is going down in the Philador network, and this doesn't prompt an investigation from Pearson?

 

I mean, why would you NOT investigate fraud claims?  Don't ask, don't tell?  Instead, keep it rolling along as long as possible because we're confident we have no recourse?

 

Look, if Pearson does launch an investigation based on Reitz' accusations, then he might have to shut the whole thing down.  But if he tries to bury it as "standard collections" and keep the train rolling, then he keeps on raking in the dough.  But you'd only risk that if you were confident that you had no legal recourse. 

 

On their slide deck the part about limited liability is listed as one of the benefits to the options structure.

[wisdom]

While I can see that you may be right, I can also see that they might be right in their explanation too. There could have been any number of reasons why they did what they did.

 

It is possible that the company actually saw it as a collection dispute. It is easy to see it differently in hindsight.

[wisdom]

Limited liability - That is a standard explanation. The reason for incorporating, for using non-recourse debt, etc is to limit your losses. I believe this to be prudent rather than proof of a master plan to commit fraud.

[ERICOPOLY]

That is standard explanation. The reason for incorporating, for using non-recourse debt, etc is to limit your losses. I believe this to be prudent rather than proof of a master plan to commit fraud.

 

I didn't say it was set up that way to be a master plan to commit fraud.

 

It however was set up that way....

 

... and the California pharmacist is panicked over widespread fraud and lawyered up

 

and Pearson didn't tell shareholders...

 

and he didn't investigate....

 

even though this California pharmacy is critical to their being able to sell product through California...

 

 

And it's not rational to question Pearson's story until their show trial is completed!

 

 

[kab60]

• Finally, the most important one - current valuation gives no margin of safety for the risks one is taking. Debt / EBITDA is over 6.5x. With debt of over $30 billion and EBITDA of less than $4.5 billion, it will take them next 3-4 years to come to Debt / EBITDA of 3x. Lots of things can go wrong along the way. Regulators going after them, fines, change in business model, failure in execution, and other cockroaches running around. If Valeant bought its assets for $40 billion, my argument is that they overpaid in many of these cases. Even if that is a fair value to pay, $40 billion of assets - $30 billion of debt gives us $10 billion in market cap. That is 1/3rd current value. These assets are worth current market cap ONLY if Valeant can play all the games - raise prices, grow organically, cut costs - all of which in my opinion are not sustainable.

This point has been raised a couple of times, but it seems like it isn't adressed. I think it's the most important at the moment because there's a lot of speculation. Obviously it was a bigger issue when the stock was at 250$ dollar but I haven't for the life of me been able to figure out how VRX was/is able to create so much value by buying contact lenses and foot fungus (creme) assets late in a bull market even though they slash costs, have a low tax rate and supposedly a superior distribution network. Usually the seller gets it right. I have no position because it's wayyy too complicated for my liking but I just don't understand how you can create value like that.

[Aberhound]

We may be looking at an example of controlled opposition and effective narrative. Suppose you can organize a group. If you want to control the price movements it works better if you control both sides like politics. Kind of like moving a bolder down a hill with a person in front and in back rather than just one person pushing. The former has far more control because there is a balanced interchange of forces. You get a short hedge fund, a long hedge fund, some friendly politicians, and a short research fund, maybe others such as friendly press. You take a company which has a competitive advantage but has some dirt. You get TPP passed creating an environment for upside. You get the politicians to make an issue about drug pricing and you get the short report claiming fraud. You get the short hedge fund(s) to short. Then you get the long hedge funds to play the part of the long. The people who profit could be anyone who in this scenario make money on both the short then the long. Notice how the arguments of most players are less than optimal. This is a badge of controlled opposition. Why would the short research say there was fraud twice and there fails to provide the smoking gun both times. Why would the long hedge fund or the executives make stupid arguments such as “others are doing worse”. The narrative from all players has not been stellar. Bertrand Russell’s revealing book The Impact of Science on Society shows the mind set of the type of people that are able to use effective narrative well. Further, scientific methods may allow technology to improve the control. Newscasts have a lot of blue for a reason. EMF frequencies may have effects. I suggest that investors should learn to discern their emotions and consider the existence of effective narrative. This may be one reason why hyper rational people like Buffett and Munger do better than other investors.

 

 

[ERICOPOLY]

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

[constructive]

If this trades at 10b market cap you are speculating on almost certain bankruptcy for equity holders. In other words, buying at $100 vs $3 are , in my  mind, exactly equivalent.

 

People say things like this a lot and it is wrong 100% of the time.

[ourkid8]

Eric, I respect your views but I think you are wayyy off base here.  Just take it easy and wait for the special committee to determine what happened.  the BOD at Valeant are not a bunch of idiots who rubber stamp everything MP does.  You have extremely savy and cut throat individuals who have a lot at stake and they will question why. (e.g. Valueact and Ackman as he had access to their books in the past)

 

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

[rishig]

• Finally, the most important one - current valuation gives no margin of safety for the risks one is taking. Debt / EBITDA is over 6.5x. With debt of over $30 billion and EBITDA of less than $4.5 billion, it will take them next 3-4 years to come to Debt / EBITDA of 3x. Lots of things can go wrong along the way. Regulators going after them, fines, change in business model, failure in execution, and other cockroaches running around. If Valeant bought its assets for $40 billion, my argument is that they overpaid in many of these cases. Even if that is a fair value to pay, $40 billion of assets - $30 billion of debt gives us $10 billion in market cap. That is 1/3rd current value. These assets are worth current market cap ONLY if Valeant can play all the games - raise prices, grow organically, cut costs - all of which in my opinion are not sustainable.

This point has been raised a couple of times, but it seems like it isn't adressed. I think it's the most important at the moment because there's a lot of speculation. Obviously it was a bigger issue when the stock was at 250$ dollar but I haven't for the life of me been able to figure out how VRX was/is able to create so much value by buying contact lenses and foot fungus (creme) assets late in a bull market even though they slash costs, have a low tax rate and supposedly a superior distribution network. Usually the seller gets it right. I have no position because it's wayyy too complicated for my liking but I just don't understand how you can create value like that.

 

Thank you. I brought this up several times but it was completely ignored.  :(

[wisdom]

You can read up on what the management has stated before. That is the best that I know of.

 

As far as I see it - 3G is doing something similar but in a different industry.

[Orchard]

https://weitzinvestments.com/about/content/announcements/interimupdate11.2.15.fs

[ERICOPOLY]

Eric, I respect your views but I think you are wayyy off base here.  Just take it easy and wait for the special committee to determine what happened.  the BOD at Valeant are not a bunch of idiots who rubber stamp everything MP does.  You have extremely savy and cut throat individuals who have a lot at stake and they will question why. (e.g. Valueact and Ackman as he had access to their books in the past)

 

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

 

Ackman dismissed Reitz for superficial reasons.  He said for example that Reitz was caught in a lie over his knowledge of who owned him.  There are multiple reasons to lie.  For example, if you were Reitz and you knew you had done bad shit for a while and then grew a conscience when your "everyone does this bad shit in this industry" ratioanalizing wears off (due to the scale that the malfeasance had grown to), then perhaps you'd start lying your way of it by pretending to have had no knowledge at all.  So some lame part of your story is detected to be a lie.  That doesn't mean that you are lying about the existence of fraud, it likely confirms the existence of fraud which is why you have started lying... only you got a small detail of your narrative wrong.  You are lying because you are scared.  Why are you scared?

[cmlber]

Eric, I respect your views but I think you are wayyy off base here.  Just take it easy and wait for the special committee to determine what happened.  the BOD at Valeant are not a bunch of idiots who rubber stamp everything MP does.  You have extremely savy and cut throat individuals who have a lot at stake and they will question why. (e.g. Valueact and Ackman as he had access to their books in the past)

 

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

 

Ackman dismissed Reitz for superficial reasons.  He said for example that Reitz was caught in a lie over his knowledge of who owned him.  There are multiple reasons to lie.  For example, if you were Reitz and you knew you had done bad shit for a while and then grew a conscience when your "everyone does this bad shit in this industry" ratioanalizing wears off (due to the scale that the malfeasance had grown to), then perhaps you'd start lying your way of it by pretending to have had no knowledge at all.  So some lame part of your story is detected to be a lie.  That doesn't mean that you are lying about the existence of fraud, it likely confirms the existence of fraud which is why you have started lying... only you got a small detail of your narrative wrong.  You are lying because you are scared.  Why are you scared?

 

Eric, why do you think Reitz is so credible?  He said he had never heard of Valeant in his lawsuit, Peason said "From January to July of this year, Valeant sent email invoices to R&O approximately 75 times and R&O consistently received and paid these invoices."  Very easy to prove that emails were sent, so why would Pearson lie about that?

 

Is it not possible that Valeant investigated his claims of fraud and determined there was no fraud? 

 

Nobody has proven any fraud happened yet.  All we have is this guy who has been proven to be a liar saying there was fraud.

[ERICOPOLY]

Several people have already stated that cutting corners and bad ethics are standard, that there is a toxic culture in the industry...

 

... then why is it so easy for you guys (and Ackman) to not take Reitz seriously?  Isn't it the kind of toxic environment ripe for breeding a widespread fraud?  So why dismiss him?

[ERICOPOLY]

Eric, I respect your views but I think you are wayyy off base here.  Just take it easy and wait for the special committee to determine what happened.  the BOD at Valeant are not a bunch of idiots who rubber stamp everything MP does.  You have extremely savy and cut throat individuals who have a lot at stake and they will question why. (e.g. Valueact and Ackman as he had access to their books in the past)

 

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

 

Ackman dismissed Reitz for superficial reasons.  He said for example that Reitz was caught in a lie over his knowledge of who owned him.  There are multiple reasons to lie.  For example, if you were Reitz and you knew you had done bad shit for a while and then grew a conscience when your "everyone does this bad shit in this industry" ratioanalizing wears off (due to the scale that the malfeasance had grown to), then perhaps you'd start lying your way of it by pretending to have had no knowledge at all.  So some lame part of your story is detected to be a lie.  That doesn't mean that you are lying about the existence of fraud, it likely confirms the existence of fraud which is why you have started lying... only you got a small detail of your narrative wrong.  You are lying because you are scared.  Why are you scared?

 

Eric, why do you think Reitz is so credible?  He said he had never heard of Valeant in his lawsuit, Peason said "From January to July of this year, Valeant sent email invoices to R&O approximately 75 times and R&O consistently received and paid these invoices."  Very easy to prove that emails were sent, so why would Pearson lie about that?

 

Is it not possible that Valeant investigated his claims of fraud and determined there was no fraud? 

 

Nobody has proven any fraud happened yet.  All we have is this guy who has been proven to be a liar saying there was fraud.

 

Is it unusual for a person involved in a crime to have lies in his story?

[cmlber]

Several people have already stated that cutting corners and bad ethics are standard, that there is a toxic culture in the industry...

 

... then why is it so easy for you guys (and Ackman) to not take Reitz seriously?  Isn't it the kind of toxic environment ripe for breeding a widespread fraud?  So why dismiss him?

 

1) because he's been proven to be a liar, 2) because it makes no sense that Pearson would totally ignore claims of fraud, 3) because he hasn't said what the fraud is, just that it's happening.

 

[cmlber]

Eric, I respect your views but I think you are wayyy off base here.  Just take it easy and wait for the special committee to determine what happened.  the BOD at Valeant are not a bunch of idiots who rubber stamp everything MP does.  You have extremely savy and cut throat individuals who have a lot at stake and they will question why. (e.g. Valueact and Ackman as he had access to their books in the past)

 

The limited liability...

 

I raised the point because it incentivizes them TO NOT INVESTIGATE fraud allegations.

 

Stick fingers in ear and loudly say "LAH LAH LAH LAH LAH LAH LAH LAH LAH LAH".

 

Meanwhile keep Philador network doors open and continue to rake in the money, knowing that your ass if covered if there is fraud.

 

But if you investigate and find fraud, you have to shut down the Philador network.

 

So it's best to concoct a story that you think Reitz is a just a bad debt that needs to be collected on, because the other option means you might not hit your growth targets due to the risk of finding evidence of fraud.

 

So it's not necessarily that Pearson is likely guilty of knowing about a fraud and covering it up, but rather perhaps more likely that he'd use every tool in the shed to not investigate a fraud.

 

Ackman dismissed Reitz for superficial reasons.  He said for example that Reitz was caught in a lie over his knowledge of who owned him.  There are multiple reasons to lie.  For example, if you were Reitz and you knew you had done bad shit for a while and then grew a conscience when your "everyone does this bad shit in this industry" ratioanalizing wears off (due to the scale that the malfeasance had grown to), then perhaps you'd start lying your way of it by pretending to have had no knowledge at all.  So some lame part of your story is detected to be a lie.  That doesn't mean that you are lying about the existence of fraud, it likely confirms the existence of fraud which is why you have started lying... only you got a small detail of your narrative wrong.  You are lying because you are scared.  Why are you scared?

 

Eric, why do you think Reitz is so credible?  He said he had never heard of Valeant in his lawsuit, Peason said "From January to July of this year, Valeant sent email invoices to R&O approximately 75 times and R&O consistently received and paid these invoices."  Very easy to prove that emails were sent, so why would Pearson lie about that?

 

Is it not possible that Valeant investigated his claims of fraud and determined there was no fraud? 

 

Nobody has proven any fraud happened yet.  All we have is this guy who has been proven to be a liar saying there was fraud.

 

Is it unusual for a person involved in a crime to have lies in his story?

 

But this lie makes no sense.  Unless he has amnesia, he knows there are 75 emails showing he is lying.  So he must have thought he wouldn't have gotten caught.  Why did he think that?  Maybe he was bitter he sold out so cheap, knew something shady was going on (doesn't necessarily mean illegal) and figured if he just kept the money Valeant wouldn't want this whole thing to go public and would just write it off as being immaterial.

 

And now that he got caught, maybe he has to change the narrative to I was scared for my life and reputation because of fraud.  Only to be later proven that what he thought was fraud turns out wasn't but he made an honest mistake.

[Picasso]

I'm down the street from the West Wilshire Pharmacy.  I should drive by and peer in the window to see what's up.  Eric aren't you close by as well?  I'll meet you down there for a cup of coffee at McCafe next door.

 

Check out this world class distribution facility, lol: https://www.google.com/maps/place/West+Wilshire+Pharmacy/@34.0635352,-118.3663159,3a,75y,347.11h,92.12t/data=!3m6!1e1!3m4!1sMEj8L4fqONsNnK1nz4m2Mw!2e0!7i13312!8i6656!4m2!3m1!1s0x0:0xc9e914713241498c!6m1!1e1

 

Anyway I think investors are missing the big deal about Philidor.  It isn't just the fraud.  Everyone thought they had a durable portfolio because despite cutting R&D and SG&A they had organic growth from both pricing and sales.  No one brought up the reason why that was: Philidor and alternative fulfillment.  Well guess what, the shorts got that side business killed whether there's fraud or not.  Now all of a sudden there's this "cash EPS' which adds back 100% of amortization and some of that cash EPS is now considered a return of capital.  You can no longer give a 15x multiple to all of cash EPS.  I haven't seen anyone try to figure out what's durable and what isn't now that Philidor is gone.  Or whether Valeant has used other methods to make their business appear more durable than it actually is.  Most bulls (including myself at one point) thought, "oh cool, these guys have sustainable cash flows on practically everything in their portfolio based on organic growth."  No one, not even Ackman, has said they made a mistake and the portfolio of assets are now less "durable."