VRX - Valeant Pharmaceuticals International Inc.

[ERICOPOLY]

If true this doesn't sound good:

http://pdfsr.com/pdf/the-missing-piece

 

I can forgive anyone for ignoring that and ignoring what he had to say, but this is bizarre:

 

 

"Matching Grants for Share Purchases."

 

The executive is given matching shares when he buys stock with his own shares. 

 

So do I understand that correctly?  Like if you see an insider buy stock at $200, he is really only investing $100 of his own money?  That kind of shit (when insiders buy) makes a lot of people feel confident about the stock price.  Are they trying to pump up the stock or something?  Weird.

 

Not sure if it will be shown as an Open Market Purchase. That would be different than grant or matching grant?

 

Good point.  It's probably more like an employee stock purchase plan.

[ERICOPOLY]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

 

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

So the fun speculation is to ask why such a highly compensated executive left after roughly 2.5 years during the time when the R&O pharmacist was getting edgy?  Could there have been an internal investigation and cover-up?  Okay, now that I've spoiled the fun, you don't have to bother reading any of it and can go back to ignoring innuendo and rumors and go back to facts as we know them.

 

Of course, could be so many different explanations -- but this is theater and it is amusing and popcorn worthy at least.

 

[KCLarkin]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates. When was he hired at MedCo? When did the fraud occur at MedCo?

 

[ERICOPOLY]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates! When was he hired? When did the fraud occur?

 

Hey, I just put out the cliffs notes.  I don't subscribe to it -- it's actually pretty funny if you read it.

 

I left out the stuff about the "Enron" person who is head of an audit committe at Valeant. 

 

Of course it's all leading type stuff.  Tried to save somebody the effort of reading it.

[LongHaul]

I agree with Rishig.  Salix was a joke.  Maybe VRX gets 6% EBIT return unlevered.  But I think Pearson was desperate to do deals so he paid up. 

 

Everything is probably up for a downward risk with how VRX has been run for the last 5 yrs or so.  Tax rate, Deal model, organic growth, margins, etc.

 

This was a fascinating article.  The key point was that: "He mentioned that the management team (of VRX) set very high expectations and would fire the managers who don’t make the numbers."

http://www.gurufocus.com/news/371317/my-indirect-experiences-with-valeant-pharmaceuticals

 

Watch this video

Great Kurt Eichenwald Video (he wrote a book on Enron)

https://www.youtube.com/watch?v=HGpBhvhoA08

 

HCA with Rick Scott told the managers to "make the numbers".  And they did any way they could.

It ended up being a huge fraud and accounting scandal.  Ethical people were weeded out.

 

As soon as I saw that video I thought of Pearson.  Everyone thought he was a financial genius and there was  cult of personality around him.

 

Valeant changed their definition of organic growth in 2011  2 times (according to Veritas).  That is 2 times.  What fantasy land is Pearson in.  There is only one straightforward definition of organic growth.  You can't just make up your own organic growth definition because your business doesn't do well. 

 

As an aside I have come to hate powerpoint.  More baloney used with that program than any other.

 

 

 

[ERICOPOLY]

Yes, that's what it sounds like.

 

If true this doesn't sound good:

http://pdfsr.com/pdf/the-missing-piece

 

I can forgive anyone for ignoring that and ignoring what he had to say, but this is bizarre:

 

 

"Matching Grants for Share Purchases."

 

The executive is given matching shares when he buys stock with his own shares. 

 

So do I understand that correctly?  Like if you see an insider buy stock at $200, he is really only investing $100 of his own money?  That kind of shit (when insiders buy) makes a lot of people feel confident about the stock price.  Are they trying to pump up the stock or something?  Weird.

 

Not sure if it will be shown as an Open Market Purchase. That would be different than grant or matching grant?

 

Good point.  It's probably more like an employee stock purchase plan.

 

Somebody explained it to me in a personal message a few minutes ago.

 

It shows up as in insider direct buy as if he were just buying the same as you and I do on the open market:

http://www.sec.gov/Archives/edgar/data/885590/000088559015000051/xslF345X03/primary_doc.xml

 

Then after a period of time he gets his first Restricted Stock Unit vested:

http://www.sec.gov/Archives/edgar/data/885590/000088559015000060/xslF345X03/primary_doc.xml

 

So after the date of his first purchase, we'll just think "oh look an insider is buying" and maybe we'll feel more confident in the market price.  But he might effectively be risking only 50% of market value since he will ultimately have twice as many shares yet only pay for 1/2 of them.  But they don't all vest immediately.  It's just that he really doesn't have as much of his own skin in the game as it appears.

 

It's still a decent deal for him even if the shares are 70% overvalued.  He's effectively buying $1.70 for 85 cents of his own money.  So he has a lot of downside protection.

 

Do I understand it right?

 

 

 

[KCLarkin]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates! When was he hired? When did the fraud occur?

 

Hey, I just put out the cliffs notes.  I don't subscribe to it -- it's actually pretty funny if you read it.

 

I left out the stuff about the "Enron" person who is head of an audit committe at Valeant. 

 

Of course it's all leading type stuff.  Tried to save somebody the effort of reading it.

 

Okay, but you missed the headline:

 

* Laizer invents time machine. Commits fraud at MedCo before even being hired.

[Guest Schwab711]

Is Philidor still open?

 

http://cafepharma.com/boards/threads/is-philidor-still-open.587530/

 

------

 

Has anyone found anything on (1) PT Kukah Usaha Maju (PT KUM) or (2) Al Balsam Al Shafi Gen Tr LLC (UAE Corp)?

[ERICOPOLY]

In the first filing, it is reported that he paid $232.51 per share for 12,900 shares.

 

In the second filing, it is reported a $0 price per share for 12,900 shares, but there are footnotes about the vesting period for the restricted stock and the words "Employee Share Matching Program".

 

So basically he might have been willing to pay 1/2 the market price is all we can infer from his "bullishness".

[ERICOPOLY]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates! When was he hired? When did the fraud occur?

 

Hey, I just put out the cliffs notes.  I don't subscribe to it -- it's actually pretty funny if you read it.

 

I left out the stuff about the "Enron" person who is head of an audit committe at Valeant. 

 

Of course it's all leading type stuff.  Tried to save somebody the effort of reading it.

 

Okay, but you missed the headline:

 

* Laizer invents time machine. Commits fraud at MedCo before even being hired.

 

Yes I did.  You are correct there.

[arcube]

Okay, here's the Cliff's Notes:

 

1) it insinuates that Laizer Kornwasser was the right hand man of the Medco CEO when all the fraud went down

2)  he was hired by Valeant the exact same day that Philador was incorporated

3)  he had an "obscure" title of "General Group Chairman" at Valeant

4)  he had a massive compensation package with enormous amounts of it tied to stock awards (lots of reasons to stick around for 10 years)

5)  he disappeared from Valeant in July 2015.  He no longer works for Valeant.

 

Anyways, that's basically the very abbreviated version. 

 

Of course, it also ends with a taunt to Bill Ackman:

 

Yours truly,

- Whistleblower X

PS – I’d get out now, Bill. Save your fund and stop the BS. The 4 stages of grief are: denial, anger,

bargaining and acceptance. Your conference call was the bargaining. Now is the time for acceptance. 

July 2015 also rings a bell because that's when the pharmacist at R&O flipped his lid

Also in late July 2015, he joined the board of directors of Everyday Health (whoever that is):

http://www.prnewswire.com/news-releases/everyday-health-inc-appoints-laizer-kornwasser-to-the-board-of-directors-300117951.html

 

Eric, I am briefly lifting my self-imposed ban because you are smarter than this. Look at the dates! When was he hired? When did the fraud occur?

 

Hey, I just put out the cliffs notes.  I don't subscribe to it -- it's actually pretty funny if you read it.

 

I left out the stuff about the "Enron" person who is head of an audit committe at Valeant. 

 

Of course it's all leading type stuff.  Tried to save somebody the effort of reading it.

 

While there is more to this saga that will come to light, this last two weeks of learning about VRX reminded me of one of my favorite all time movies. Michael Clayton. While that is about an agri-chem giant, it shows how people when kept unchecked sometimes go too far . Again these are not same situations, just thought it is interesting.

[rishig]

I have an open mind and I am willing to change my mind, if someone can tell me with a high degree of confidence why he or she understands the underlying assets are definitely worth significantly more than the current enterprise value of $60B, i.e. 1.5x the sum of all acquisition prices of $40B. This can be supported using anything other than because "Mr. Pearson is a great allocator of capital and their deal model says they only do acquisitions at 20% IRR and that's why".

 

Salix, their last acquisition had $1.1B in revenue in 2014 and even at Valeant's cost structure, no more than $650M in EBITDA (50% EBITDA margin as per Ackman's slides). And for sake of argument, let's say that *all* of that converts into free cash flow (how about 0 taxes, 0 interest). That is a payback period of 23 years! You need some massive organic growth to match their "deal model" of 20% IRR. We all know that they have fewer levers to pull, no one can say exactly which ones. But like Ben Graham said "You don't have to know a man's exact weight to know that he's fat"

 

Rishig,

I might be missing something here. How did you get $650mm in EBITDA at 50% margin? Do you mean $550m?

 

$550mm, right. Sorry

[wisdom]

http://www.valuewalk.com/2015/11/icahn-dealbook-conference/

 

Haven't watched this but apparently Icahn defended VRX.

[Picasso]

Interesting article LongHaul.  There are a few weird things about Salix.  1) If you think you will be earning those ridiculously high estimates in 2017 and beyond, why stuff the channels?  2) Allergan had approached Salix to rebuff Valeant but walked away from that deal.  3) If you were confident in the growth of the business, why didn't you ask for Valeant stock? 

 

Does anyone have reasoning why Salix can match those estimates in the future?  I think most of it was based on management presentations and sell side research.

[dontdodebt]

http://www.valuewalk.com/2015/11/icahn-dealbook-conference/

 

Haven't watched this but apparently Icahn defended VRX.

 

No he did not. Watch the interview

[wisdom]

quoting the headline.

[ERICOPOLY]

quoting the headline.

 

There's a "tweet" there that quotes him saying something with regards to how people are picking on Valeant but lots of companies did tax inversions.  I think that's the only thing on that link related to Icahn defending Valeant.

[lessthaniv]

Boy,

 

Red titles, yellow highlights and an Ackman taunt .. Never seen that before.

 

 

[AzCactus]

Not to be crass but isn't the only real question: to what extent is the long term earnings power of a Valeant effected? If the answer is either negatively or I don't know this belongs in the too hard pile and if the answer is not at all or a little bit this would seem like an interesting price to start considering a position.  As someone who has been on the sidelines this whole situation seems like a soap opera.

[LC]

Not to be crass but isn't the only real question: to what extent is the long term earnings power of a Valeant effected? If the answer is either negatively or I don't know this belongs in the too hard pile and if the answer is not at all or a little bit this would seem like an interesting price to start considering a position.  As someone who has been on the sidelines this whole situation seems like a soap opera.

 

Definitely turning into a soap opera.

 

I agree with your question. My issue is how the heck am I supposed to know? These guys play pretty fast and loose (or so it seems). How can I get a sense of where true earnings power is? Can I trust the revenue line? How gutted is the SG&A line? And the crazy low tax rate, is that really going to be sustainable? Where are the skeletons?

 

The counterpoint is that "well at some price low enough it becomes attractive". Maybe so, but how the heck can you figure out where that price is without any sense of earnings power?

[jay21]

 

That doesn't answer my question. Repeating again:

 

2016E EBITDA of $1.1B as per picasso in thread #4516. As per your model, you need revenue of $2.2B in 2016, right, to get an EBITDA of $1.1B? From 2014, 10K revenue for 2014 was $1.1B. That requires growth of 41% in revenue CAGR for 2014-2016 under Valeant umbrella. Pre-acquisition, revenue, for Salix grew at 15% from 2012 - 2014. How do you take a company that has been growing revenue at 15% and grow at 41%

 

Latest guidance from Salix at 2014 YE:

 

"For the year 2016, the company expects, total net product revenue of between approximately $1.9 billion and $2.0 billion. Gross margins of approximately 80%. Gross-to-net adjustments of between approximately 28% and 30%. EBITDA of between approximately $865 million and $945 million. Cash income tax rate of approximately 14%. Earnings per share of between approximately $8.50 and $9.50 and fully diluted shares of 77 million. GAAP net income is expected to be $274 million. EBITDA of $907 million. Non-GAAP net income to be $691 million or $8.98 per diluted share"

 

Apparently all their products were ramping up. You can review Salix's investor day deck to see what they expected in revenue growth from their products.

[Rasputin]

Holy crap, check out page 76 under the Salix forecasts.  They took a ruler out to 2024 saying they would earn around $10 billion of revenue and $44 of adjusted EPS.

 

I don't know how I missed that the last time I reviewed that information.  Management was certainly bullish but why the hell would they sell then?  Scandal and everything set aside.

 

I think stand-alone revenue forecast in the Salix merger doc is more believable.  JP Morgan also issued unlevered fcf forecast in that merger doc.  Doesn't take into account $500 million cost cut. 

[AzCactus]

Not to be crass but isn't the only real question: to what extent is the long term earnings power of a Valeant effected? If the answer is either negatively or I don't know this belongs in the too hard pile and if the answer is not at all or a little bit this would seem like an interesting price to start considering a position.  As someone who has been on the sidelines this whole situation seems like a soap opera.

 

Definitely turning into a soap opera.

 

I agree with your question. My issue is how the heck am I supposed to know? These guys play pretty fast and loose (or so it seems). How can I get a sense of where true earnings power is? Can I trust the revenue line? How gutted is the SG&A line? And the crazy low tax rate, is that really going to be sustainable? Where are the skeletons?

 

The counterpoint is that "well at some price low enough it becomes attractive". Maybe so, but how the heck can you figure out where that price is without any sense of earnings power?

 

LC, as I mentioned above I've been on the sidelines.  However, if you can't figure out a fair price, true earnings etc it belongs in the tok hard pile.  I'll admit I've been intrigued given the names of so,e investors who are so heavily invested.

[jay21]

Holy crap, check out page 76 under the Salix forecasts.  They took a ruler out to 2024 saying they would earn around $10 billion of revenue and $44 of adjusted EPS.

 

I don't know how I missed that the last time I reviewed that information.  Management was certainly bullish but why the hell would they sell then?  Scandal and everything set aside.

 

I think stand-alone revenue forecast in the Salix merger doc is more believable.  JP Morgan also issued unlevered fcf forecast in that merger doc.  Doesn't take into account $500 million cost cut.

 

Can someone post the link? I hate sorting through proxies and they usually have a ton of good info.

[Rasputin]

Holy crap, check out page 76 under the Salix forecasts.  They took a ruler out to 2024 saying they would earn around $10 billion of revenue and $44 of adjusted EPS.

 

I don't know how I missed that the last time I reviewed that information.  Management was certainly bullish but why the hell would they sell then?  Scandal and everything set aside.

 

I think stand-alone revenue forecast in the Salix merger doc is more believable.  JP Morgan also issued unlevered fcf forecast in that merger doc.  Doesn't take into account $500 million cost cut.

 

Can someone post the link? I hate sorting through proxies and they usually have a ton of good info.

 

Here is JP Morgan unlevered fcf forecast

 

2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Unlevered Free Cash

Flow $ 75 $ 468 $ 744 $ 856 $1,109 $1,234 $1,384 $1,444 $1,740 $1,878 $1,872 $1,633 $1,380 $1,131 $ 974

 

I'm attaching management revenue forecast.

 

But I highly recommend reading the merger doc, doesnt take long. 

SALIX_PRODUCT_REVENUE_FORECAST_FROM_MERGER_DOC.pdf