VRX - Valeant Pharmaceuticals International Inc.

[Guest Schwab711]

Ok, a few random thoughts. 

 

The short case so far has been easily "beatable" for the following reasons:

 

1. Citron Fraud: well, it isn't fraud, in fact the lawsuit proves the exact opposite, that they were selling products and Reitz was getting paid.

 

2. Hempton: Focused mainly on insurance fraud.  If that's the case, cut out the tumor, pay a fine and move on.  This was the crux of Ackman's argument. 

 

 

Future Short case: The Philidor sales channel model is much more important to VRX than they are currently disclosing.  I can't really prove this yet, but I made lots of call to pharmacies and I encourage any of you to do the same.  Go visit a costco during the middle of the day.  I came away with the realization that very few, if any, of VRX's drugs move through this "normal" channel.  Their drugs don't move that way because of many hurdles:

 

1. Pharmacist suggest a generic.

2. Insurance pre-approval requires "dispense as written" so doctor must call doctor, delay, delay.

3. Most of VRX's drug have such a high sticker price that they aren't stocked.  (try to find jublia in stock at your local pharmacy, it isn't there).

 

So, the patient comes to pharmacy, they need to order Jublia, go back and forth with insurance, a week later they get the product in and the patient just doesn't come and pick it up. 

 

All of these hurdles combined are the reason for Philidor and its ilk.  Without them, I am having a hard time believing that VRXs products will sell anywhere near the numbers they are selling now.  That might not show up this Q, but it will in Q1.

 

VRX claims multiple times that Philidor is only 7% of sales, but I think Philidor may be fudging that and the network pharmacies are not being consolidated.  If I am wrong on how they are fudging it, I am probably still right on the underlying business channel problems.  I think VRX is playing fast and loose with the definition of specialty pharmacy and the amount of revenues that makes up, in the same way they were playing fast and loose with the idea that they don't "own" Philidor.  Anyway, my two cents.  I did this research when I was long the stock (I bought after the citron piece on Oct 21). I sold earlier this week, so there's my bias... Open to thoughts or suggestions.

 

That's the thing. You take the fine for insurance fraud. You take the write down for stuffing channels (allegedly). Maybe some goodwill impairment. You take the impending fine for tax fraud/evasion (2014-2015 financials will surely be audited soon, as well). Maybe that all adds up to just a few billion dollars and you think "no big deal".

 

Well, VRX has created a liquidity crisis from 2018-2025. You have to be sure that bankers are willing to underwrite >$20b in bonds over that period for VRX to survive (assuming current guidance is valid and 100% of FCF goes to debt repayment). VRX currently has ~$3b in liquidity ($1.4b cash + $1.5b in un-used revolver [which may be pulled, depending on covenants]). They either pay down debt or increase liquidity but you can't have it both ways. Depending on when the fines occur and how much extra expense/sales drop is realized, VRX is toast [to put it politely].

 

How is VRX going to afford these fines?

Who is going to loan/underwrite VRX when they are so desperate?

 

I think bondholders will want to preserve whatever value is left and VRX equity is going to zero. It's just a matter of when.

[blainehodder]

Not to criticize anyone, but CoBF members are quoting buffet too much on every thread. How about Buffet's Geico increasing car insurance premiums for every renewal even though no change in driver history and how about their claims processing like 70% fault or 80 % fault ratio. It applies to everyone including buffet's companies too. I like buffet and his philanthropy, but he runs business like every other businessman

 

I think there is some fairness to that comment, but you've really got a family over the barrel if they have a sick loved one and they have to choose between helping him and selling the house, or watching him suffer.  Even men on the front lines who've seen a lot of war can come across a situation and say :"wow, that's some really cold shit".

 

There are plenty of diseases currently where there is no known cure. In a free market system, however convoluted the money flow and however questionable the morality appears on the surface, there is potential hope that eventually a cure can be found. No other system offers that and in a price control scenario, we might not even know and miss what we didn't invent.

 

I am not talking abt a hypothetical child here, but my own, who suffers from multiple conditions currently incurable. I want to look him in the eye and say, this system offers us the best chance that eventually there will be something invented to make your life better than the current prognosis. It maybe pricey initially, like stents in heart surgery were, but eventually the system will make sure it is affordable.

 

Existence of cure however pricey, does more for humanity, than absence of cure in the long run. There are plenty of ways to pay for expensive cures, if they exist. While there maybe heart wrenching stories of children dying because the family couldn't afford the cure, there are plenty of children (multiples of the first scenario) who die each year because there is no known cure available at this time. I guess as a society we find it easier to rationalize the later.

 

I sincerely hope there is lot of excess money to be made for investors in this industry. That will ensure attraction for new money to fund new R&D and thus new cures.

 

I find it deeply immoral to muzzle potential future life saving inventions in order to save a few bucks now and make sure some hedge fund investors don't get rich.

 

I agree that you don't want to dis-incentivize drug development.

 

But these are drugs that were developed already for a given price point.  The R&D was already deployed.  Therefore, the R&D happened and the drug was developed.

 

....

 

Then the drug was bought by VRX or whomever and the price skyrocketed overnight.

 

Let's say that the drug's price was capped at the level it was selling for before VRX bought it.  We know for certain that the drug development happened, and it was undeterred by that previously far-lower price point.

 

It could just be that the prior manufacturer had morals that led to "inefficient" pricing.  VRX is exploiting that inefficiency that exists in within the law yet outside of morality.

 

And it doesn't impact R&D to just leave pricing within the bounds of morality -- because after all, the drug was developed wasn't it?

 

I don't believe that the following counter argument holds, but I think Pearson would argue:

 

-the original company wouldn't have worked on said drug unless they saw the opportunity to be bought out by a big player like VRX

-M&A activity drives capital into R&D

-M&A activity exists partially because of the opportunity to exploit " price inefficiencies"

 

Clearly that is wild stretch of an argument particularly on moral grounds, but you could point to a similar dynamic in the tech space.  People are building apps and websites that have little hope of paying back the original investor unless they are bought out by a larger firm that can integrate them, charge higher prices for them, or load them with ads.

 

Again, I dont really believe the argument is a strong one, but I think that is how Pearson would try to justify it.

 

 

[ERICOPOLY]

Not to criticize anyone, but CoBF members are quoting buffet too much on every thread. How about Buffet's Geico increasing car insurance premiums for every renewal even though no change in driver history and how about their claims processing like 70% fault or 80 % fault ratio. It applies to everyone including buffet's companies too. I like buffet and his philanthropy, but he runs business like every other businessman

 

I think there is some fairness to that comment, but you've really got a family over the barrel if they have a sick loved one and they have to choose between helping him and selling the house, or watching him suffer.  Even men on the front lines who've seen a lot of war can come across a situation and say :"wow, that's some really cold shit".

 

There are plenty of diseases currently where there is no known cure. In a free market system, however convoluted the money flow and however questionable the morality appears on the surface, there is potential hope that eventually a cure can be found. No other system offers that and in a price control scenario, we might not even know and miss what we didn't invent.

 

I am not talking abt a hypothetical child here, but my own, who suffers from multiple conditions currently incurable. I want to look him in the eye and say, this system offers us the best chance that eventually there will be something invented to make your life better than the current prognosis. It maybe pricey initially, like stents in heart surgery were, but eventually the system will make sure it is affordable.

 

Existence of cure however pricey, does more for humanity, than absence of cure in the long run. There are plenty of ways to pay for expensive cures, if they exist. While there maybe heart wrenching stories of children dying because the family couldn't afford the cure, there are plenty of children (multiples of the first scenario) who die each year because there is no known cure available at this time. I guess as a society we find it easier to rationalize the later.

 

I sincerely hope there is lot of excess money to be made for investors in this industry. That will ensure attraction for new money to fund new R&D and thus new cures.

 

I find it deeply immoral to muzzle potential future life saving inventions in order to save a few bucks now and make sure some hedge fund investors don't get rich.

 

I agree that you don't want to dis-incentivize drug development.

 

But these are drugs that were developed already for a given price point.  The R&D was already deployed.  Therefore, the R&D happened and the drug was developed.

 

....

 

Then the drug was bought by VRX or whomever and the price skyrocketed overnight.

 

Let's say that the drug's price was capped at the level it was selling for before VRX bought it.  We know for certain that the drug development happened, and it was undeterred by that previously far-lower price point.

 

It could just be that the prior manufacturer had morals that led to "inefficient" pricing.  VRX is exploiting that inefficiency that exists in within the law yet outside of morality.

 

And it doesn't impact R&D to just leave pricing within the bounds of morality -- because after all, the drug was developed wasn't it?

 

I don't believe that the following counter argument holds, but I think Pearson would argue:

 

-the original company wouldn't have worked on said drug unless they saw the opportunity to be bought out by a big player like VRX

-M&A activity drives capital into R&D

-M&A activity exists partially because of the opportunity to exploit " price inefficiencies"

 

Clearly that is wild stretch of an argument particularly on moral grounds, but you could point to a similar dynamic in the tech space.  People are building apps and websites that have little hope of paying back the original investor unless they are bought out by a larger firm that can integrate them, charge higher prices for them, or load them with ads.

 

Again, I dont really believe the argument is a strong one, but I think that is how Pearson would try to justify it.

 

And I think my argument has lots of implementation weaknesses because it may encourage firms to introduce drugs at much higher initial prices if there are regulators that are approving incremental price hikes.

 

Well, the market may take care of Pearson/Valeant anyhow -- we'll see.

[sampr01]

Not to criticize anyone, but CoBF members are quoting buffet too much on every thread. How about Buffet's Geico increasing car insurance premiums for every renewal even though no change in driver history and how about their claims processing like 70% fault or 80 % fault ratio. It applies to everyone including buffet's companies too. I like buffet and his philanthropy, but he runs business like every other businessman

 

Not sure this analogy makes sense. In most cases GEICO charges the lowest price on an otherwise commodity product. They don't exactly have pricing power. If their prices go up less than premium increases for the entire industry, they're still being competitive.

 

Valeant gains access to drugs with likely no viable substitutes and charges up the ass on them just because they can.

 

Would Buffett do the same if he were in Pearson's position? Highly doubtful - he has always stuck to his "front page" principle. As Charlie Munger says, such a price gouging practice is unsustainable as it draws extra scrutiny and public outrage that will ultimately necessitate change.

 

Is Geico spending lot on R&D or related expenditure or their assets have limited time span like drugs?, My point is Buffet is a good businessman and make money for his partners like everyone else. What about his investment partnership with 3G, cutting jobs and closing plants to increase profitability. Only difference is he is NOT investing or operating in Pharma industry. Pharma/Biotech companies needs to spend lot of $$$$$$ on Preclinical/Clinical studies to get approval from FDA and they have lot of public/political/regulatory scrutiny.

[cmlber]

Ok, a few random thoughts. 

 

The short case so far has been easily "beatable" for the following reasons:

 

1. Citron Fraud: well, it isn't fraud, in fact the lawsuit proves the exact opposite, that they were selling products and Reitz was getting paid.

 

2. Hempton: Focused mainly on insurance fraud.  If that's the case, cut out the tumor, pay a fine and move on.  This was the crux of Ackman's argument. 

 

 

Future Short case: The Philidor sales channel model is much more important to VRX than they are currently disclosing.  I can't really prove this yet, but I made lots of call to pharmacies and I encourage any of you to do the same.  Go visit a costco during the middle of the day.  I came away with the realization that very few, if any, of VRX's drugs move through this "normal" channel.  Their drugs don't move that way because of many hurdles:

 

1. Pharmacist suggest a generic.

2. Insurance pre-approval requires "dispense as written" so doctor must call doctor, delay, delay.

3. Most of VRX's drug have such a high sticker price that they aren't stocked.  (try to find jublia in stock at your local pharmacy, it isn't there).

 

So, the patient comes to pharmacy, they need to order Jublia, go back and forth with insurance, a week later they get the product in and the patient just doesn't come and pick it up. 

 

All of these hurdles combined are the reason for Philidor and its ilk.  Without them, I am having a hard time believing that VRXs products will sell anywhere near the numbers they are selling now.  That might not show up this Q, but it will in Q1.

 

VRX claims multiple times that Philidor is only 7% of sales, but I think Philidor may be fudging that and the network pharmacies are not being consolidated.  If I am wrong on how they are fudging it, I am probably still right on the underlying business channel problems.  I think VRX is playing fast and loose with the definition of specialty pharmacy and the amount of revenues that makes up, in the same way they were playing fast and loose with the idea that they don't "own" Philidor.  Anyway, my two cents.  I did this research when I was long the stock (I bought after the citron piece on Oct 21). I sold earlier this week, so there's my bias... Open to thoughts or suggestions.

 

That's the thing. You take the fine for insurance fraud. You take the write down for stuffing channels (allegedly). Maybe some goodwill impairment. You take the impending fine for tax fraud/evasion (2014-2015 financials will surely be audited soon, as well). Maybe that all adds up to just a few billion dollars and you think "no big deal".

 

Well, VRX has created a liquidity crisis from 2018-2025. You have to be sure that bankers are willing to underwrite >$20b in bonds over that period for VRX to survive (assuming current guidance is valid and 100% of FCF goes to debt repayment). VRX currently has ~$3b in liquidity ($1.4b cash + $1.5b in un-used revolver [which may be pulled, depending on covenants]). They either pay down debt or increase liquidity but you can't have it both ways. Depending on when the fines occur and how much extra expense/sales drop is realized, VRX is toast [to put it politely].

 

How is VRX going to afford these fines?

Who is going to loan/underwrite VRX when they are so desperate?

 

I think bondholders will want to preserve whatever value is left and VRX equity is going to zero. It's just a matter of when.

 

Schwab, do you think Valeant will still be in the headlines every day in 2019 when they need to refinance?  If you do, you should short newspapers.

[rpadebet]

Yes but the counter argument is VRX raising the prices to its most efficient level allows for more profits/cashflow at VRX, which allows for a higher stock price or more R&D purchases eventually. The money most likely goes into future R&D one way or another.

 

In your example, if the money is left within the general populace, it would be a allocated in proportion of general resource consumption.

 

My point is we want a market mechanism to incentivize future R&D for betterment of society. Past R&D is a sunk cost to society and benefits from that may follow for years to come.

 

Look at our utilities industry- it is for the most part a cost plus pricing model guaranteeing a return to investors. These entrenched companies don't really have as much of an incentive to look for cheaper sources of energy, as they don't worry too much about costs, they can pass them on.

 

Imagine what benefits we probably would have seen without price controls. It is quite possible that some entrepreneur like Bezos who doesn't care about current profits, decides to invest massively in solar or some other sustainable, clean and cheap source of energy, in an effort to reduce his costs over the long term and/or take market share. In such a scenario we wouldn't need the govt. incentives we have now for investment in solar and other clean energy sources.

 

Clean cheap energy could have happened naturally without all the hoopla about global warming and govt. eventually trying to force the system to do what it might have done without govt intervention anyway.

 

I know you love your TSLA, so it is a good example. Musk was willing to invest heavily in his battery plant mainly because of the long term incentive to make abnormal profits. If cars were cost+ model, do you see this happening?

[doughishere]

Valeant's decision not to hold a conference call didn't sit well with Mr. Ackman, who phoned the company's lead director, Robert Ingram, the former CEO of Glaxo Wellcome Inc. "If Mike [Pearson] hides in the bunker on this, he cant be CEO," Mr. Ackman said. Mr. Pearson cant say more now, given that the company is in the middle of an investigation, Mr. Ingram replied. Mr. Ackman told him that Valeant needed a leader to repair the company's reputation including testifying before Congress, and that "these are not Mike's best skills."

 

 

This is gonna be a long one guys....5+ years. But I think hes right. This has to be done in the light.

[Guest Schwab711]

 

Schwab, do you think Valeant will still be in the headlines every day in 2019 when they need to refinance?  If you do, you should short newspapers.

 

I thought VRX would eventually fail at $225. You are asking the wrong guy about whether future headlines affect the story.

[ourkid8]

Based on Mr. Ingram, MP is not allowed to speak to the public and defend the companies reputation until the investigation is complete?

 

Valeant's decision not to hold a conference call didn't sit well with Mr. Ackman, who phoned the company's lead director, Robert Ingram, the former CEO of Glaxo Wellcome Inc. "If Mike [Pearson] hides in the bunker on this, he cant be CEO," Mr. Ackman said. Mr. Pearson cant say more now, given that the company is in the middle of an investigation, Mr. Ingram replied. Mr. Ackman told him that Valeant needed a leader to repair the company's reputation including testifying before Congress, and that "these are not Mike's best skills."

 

 

This is gonna be a long one guys....5+ years. But I think hes right. This has to be done in the light.

[ERICOPOLY]

In such a scenario we wouldn't need the govt. incentives we have now for investment in solar and other clean energy sources.

 

Clean cheap energy could have happened naturally without all the hoopla about global warming and govt. eventually trying to force the system to do what it might have done without govt intervention anyway.

 

The external costs are not priced into fossil fuels -- the market price is not the efficient price.  The market does not price in external costs -- it only happens when governments intervene.

 

Clean energy should be subsidized because fossil fuels are subsidized by short-term thinking.

 

How do you put a price on completely destroying the planet?  I'm fairly certain that clean energy is more economical than fossil fuels at pretty much any price point.

 

People today just haven't arrived at a consensus yet as to whether we should optimize our economy for today at the expense of future generations.  Look, if we warm the planet by just 1% every 500 years, that is really going to screw up the planet one day.

 

But none of that is priced in -- we just think it's efficient to save money today and screw the future.

[doughishere]

Based on Mr. Ingram, MP is not allowed to speak to the public and defend the companies reputation until the investigation is complete?

 

Valeant's decision not to hold a conference call didn't sit well with Mr. Ackman, who phoned the company's lead director, Robert Ingram, the former CEO of Glaxo Wellcome Inc. "If Mike [Pearson] hides in the bunker on this, he cant be CEO," Mr. Ackman said. Mr. Pearson cant say more now, given that the company is in the middle of an investigation, Mr. Ingram replied. Mr. Ackman told him that Valeant needed a leader to repair the company's reputation including testifying before Congress, and that "these are not Mike's best skills."

 

 

This is gonna be a long one guys....5+ years. But I think hes right. This has to be done in the light.

 

 

 

I think that even they [the board, CEO, Upper management] don't even know whats going on. Its hard to comment on something when you dont know the extent of the wrong doing. Remember....from what i can gather this isnt even Valeants doing. So We know that there is a moral wrong somewhere, I absolute agree with this, but where that "Moral Aggressiveness" (that charlie munger talks about) lies is still under debate.

 

Some say it lies with Bill, hes the stock "owner" ofthe business. Some say its with the CEO of Valeant, hes the captain of the ship, the ultimate responsibility for the crew lies with the captain.

[AzCactus]

Am I the only one who thinks it would be fun to see Ackman or Ubben become CEO ala Warren Buffett at Salomon Brothers?

[blainehodder]

Am I the only one who thinks it would be fun to see Ackman or Ubben become CEO ala Warren Buffett at Salomon Brothers?

 

It has definitely crossed my mind, but I don't think it is likely to happen.

[ERICOPOLY]

Based on Mr. Ingram, MP is not allowed to speak to the public and defend the companies reputation until the investigation is complete?

 

Valeant's decision not to hold a conference call didn't sit well with Mr. Ackman, who phoned the company's lead director, Robert Ingram, the former CEO of Glaxo Wellcome Inc. "If Mike [Pearson] hides in the bunker on this, he cant be CEO," Mr. Ackman said. Mr. Pearson cant say more now, given that the company is in the middle of an investigation, Mr. Ingram replied. Mr. Ackman told him that Valeant needed a leader to repair the company's reputation including testifying before Congress, and that "these are not Mike's best skills."

 

 

This is gonna be a long one guys....5+ years. But I think hes right. This has to be done in the light.

 

 

 

I think that even they [the board, CEO, Upper management] don't even know whats going on. Its hard to comment on something when you dont know the extent of the wrong doing. Remember....from what i can gather this isnt even Valeants doing. So We know that there is a moral wrong somewhere, I absolute agree with this, but where that "Moral Aggressiveness" (that charlie munger talks about) lies is still under debate.

 

Some say it lies with Bill, hes the stock "owner" ofthe business. Some say its with the CEO of Valeant, hes the captain of the ship, the ultimate responsibility for the crew lies with the captain.

 

Fair enough, perhaps nobody high up at Valeant knows what's going on at Philador.  Impossible for them to comment before investigation has been done.

 

It wasn't hard for them to say "standard collections dispute" -- yet they don't understand Philador well, so how did they say that?  Don't they need to wait for the investigation to be over before they are certain either way that the pharmacist might have discovered something?

[doughishere]

Am I the only one who thinks it would be fun to see Ackman or Ubben become CEO ala Warren Buffett at Salomon Brothers?

 

I think thats a very real possibility.

[rpadebet]

we just think it's efficient to save money today and screw the future.

 

Wouldn't you say focusing too much on price increases of certain drugs suffers from this very same syndrome? short-termism?

 

Actually there is another argument - i made this on this thread back in July August when VRX was high flying stock.

 

the cure for unsustainable price increases, is price increases. to give the same example, I am (my son is) a customer of VRX contact lenses. BoL makes the best contact lens out there. We need those lenses and there is no way around it. VRX then jacked up the prices earlier this year. I wasn't thrilled.

 

then magically after i expressed my displeasure, the optometrist suggested disposable contact lenses made available by competitors. They were uneconomic before the price increase, because the BoL lenses last for a few months, and these disposable ones you have to replace every week. but with the price increase, they suddenly started making economic sense. the added advantage was with disposable lenses, I don't have to worry about keeping them clean (with other VRX products like bioTrue etc). I can get a fresh pair and they enhance the quality of vision as they are more clear on average now.

 

So, no i don't think price increases even with patent protection are an unmitigated disaster. At the right price competition will be attracted and forced to innovate around the patent. We want that. With patent protection I agree the competition is slower than normal to react and the price threshold for them to react maybe higher, but it does encourage innovation at higher price points.

[doughishere]

Based on Mr. Ingram, MP is not allowed to speak to the public and defend the companies reputation until the investigation is complete?

 

Valeant's decision not to hold a conference call didn't sit well with Mr. Ackman, who phoned the company's lead director, Robert Ingram, the former CEO of Glaxo Wellcome Inc. "If Mike [Pearson] hides in the bunker on this, he cant be CEO," Mr. Ackman said. Mr. Pearson cant say more now, given that the company is in the middle of an investigation, Mr. Ingram replied. Mr. Ackman told him that Valeant needed a leader to repair the company's reputation including testifying before Congress, and that "these are not Mike's best skills."

 

 

This is gonna be a long one guys....5+ years. But I think hes right. This has to be done in the light.

 

 

 

I think that even they [the board, CEO, Upper management] don't even know whats going on. Its hard to comment on something when you dont know the extent of the wrong doing. Remember....from what i can gather this isnt even Valeants doing. So We know that there is a moral wrong somewhere, I absolute agree with this, but where that "Moral Aggressiveness" (that charlie munger talks about) lies is still under debate.

 

Some say it lies with Bill, hes the stock "owner" ofthe business. Some say its with the CEO of Valeant, hes the captain of the ship, the ultimate responsibility for the crew lies with the captain.

 

Fair enough, perhaps nobody high up at Valeant knows what's going on at Philador.  Impossible for them to comment before investigation has been done.

 

It wasn't hard for them to say "standard collections dispute" -- yet they don't understand Philador well, so how did they say that?  Don't they need to wait for the investigation to be over before they are certain either way that the pharmacist might have discovered something?

 

Remember Philador doesn't even think they are "owned" by Valeant. So those two management teams arnt talking. And evryone is trying to cover their bases.

 

All while the papers, lawyers, the politicians and the public want their pound of flesh. From anyone and as soon as possible. And to a degree they are right. There is/was a "Moral Aggressiveness"

[ourkid8]

If they fire MP, HS will come back for the interim; guaranteed.

 

Am I the only one who thinks it would be fun to see Ackman or Ubben become CEO ala Warren Buffett at Salomon Brothers?

 

It has definitely crossed my mind, but I don't think it is likely to happen.

[AzCactus]

Guaranteed is a big word.  But ultimately to me this seems somewhat similar to the Salomon situation in other ways too.  You have reputational issues, a lack of oversight by the CEO etc.

 

If they fire MP, HS will come back for the interim; guaranteed.

 

Am I the only one who thinks it would be fun to see Ackman or Ubben become CEO ala Warren Buffett at Salomon Brothers?

 

It has definitely crossed my mind, but I don't think it is likely to happen.

[ERICOPOLY]

we just think it's efficient to save money today and screw the future.

 

Wouldn't you say focusing too much on price increases of certain drugs suffers from this very same syndrome? short-termism?

 

Well, I feel like raising the temperature of the Earth 1% every X years out to infinity is going to ruin our planet for sure.

 

But I'm not certain that Pearson's drug price increases are leading to an increase in R&D spending.

 

I know that companies have a lot of "fat" in R&D spending that is being cut by Valeant.  Maybe there would be greater R&D spending in the aggregate if we had more "fat" in the industry and less Valeant?

 

I don't know.

 

Perhaps "wasteful" R&D spending leads to cures that don't turn much of a profit?

[wisdom]

There was a news report doing the rounds that a UNH insurer had cut off Philidor last year. Wasn't that before the option agreement with Valeant was signed?

 

Does that imply that this was not related to Valeant but something that Philidor had been doing all the time?

[fareastwarriors]

Ackman, Valeant Board Both Say They Support CEO Pearson

 

http://www.bloomberg.com/news/articles/2015-11-05/ackman-valeant-board-both-say-they-support-ceo-pearson

[AzCactus]

Ackman, Valeant Board Both Say They Support CEO Pearson

 

http://www.bloomberg.com/news/articles/2015-11-05/ackman-valeant-board-both-say-they-support-ceo-pearson

 

If Ackman is taking this to heart, I would like to see him make this a 40% position the way that Buffett did with AMEX during the salad oil scandal. 

[ScottHall]

Ackman, Valeant Board Both Say They Support CEO Pearson

 

http://www.bloomberg.com/news/articles/2015-11-05/ackman-valeant-board-both-say-they-support-ceo-pearson

 

If Ackman is taking this to heart, I would like to see him make this a 40% position the way that Buffett did with AMEX during the salad oil scandal.

 

I don't know what it is with these fund managers and extreme positions. You can still outperform with 10 - 20 stocks... you don't have to go bananas on just a few.

[ERICOPOLY]

Example:  do you research a cure for a rare hereditary disease that afflicts relatively few or do you research a drug that will block the deposition of fat in a woman's butt?

 

I think if you run a drug company for maximum financial returns, you'll cut the R&D on the former and focus those dollars on the latter.

 

So maybe it's better to have companies that blow their entire wad on R&D with targeted budgets instead of cutting all the research that isn't going to meet high financial return hurdles.

 

Anyways... whatever, we should talk about something else.