VRX - Valeant Pharmaceuticals International Inc.

[NBL0303]

I am really surprised by a few things regarding Valeant's response to criticisms filed yesterday.

 

First, like others have said - why do it? And why do it in that format?  It at least makes it seem like they care very much about their short-term stock price.  I realize that many shareholders would like some companies to care more about their short-term share prices, but this seems extreme to do an extraordinary filing of this nature.

 

Second, I do not think responding to specifics in that way is wise.  It would be better tactically to send Mike Pearson on CNBC for an interview "unrelated" to recent stock price movements and bring up some of these rebuttals in that venue.  But this kind of thing sort of brings attention to those specific reports/blogs and keeps them in the discussion for longer and kind of brings you down into the mud.

 

Third, it is surprising that Valeant responded to just those four points on AZ Value' blog.  Does that mean that it is conceding that all the rest of them are true?  Of course not, but why even open the door to that kind of argument by responding in this specific tit-for-tat way.  Additionally, in my mind at least, they responded to some of AZ Value's points that weren't nearly the most salient.  What about the more central points about the evolving changes in reporting numbers/lack of certain meaningful figures in their Annual Reports/clearly misleading slides in some cases (using unweighted averages/etc.)?

 

It is not really a big deal but given these considerations and others, I think that filing was a curious move.

[Liberty]

I am really surprised by a few things regarding Valeant's response to criticisms filed yesterday.

 

First, like others have said - why do it? And why do it in that format?  It at least makes it seem like they care very much about their short-term stock price.  I realize that many shareholders would like some companies to care more about their short-term share prices, but this seems extreme to do an extraordinary filing of this nature.

 

Second, I do not think responding to specifics in that way is wise.  It would be better tactically to send Mike Pearson on CNBC for an interview "unrelated" to recent stock price movements and bring up some of these rebuttals in that venue.  But this kind of thing sort of brings attention to those specific reports/blogs and keeps them in the discussion for longer and kind of brings you down into the mud.

 

Third, it is surprising that Valeant responded to just those four points on AZ Value' blog.  Does that mean that it is conceding that all the rest of them are true?  Of course not, but why even open the door to that kind of argument by responding in this specific tit-for-tat way.  Additionally, in my mind at least, they responded to some of AZ Value's points that weren't nearly the most salient.  What about the more central points about the evolving changes in reporting numbers/lack of certain meaningful figures in their Annual Reports/clearly misleading slides in some cases (using unweighted averages/etc.)?

 

It is not really a big deal but given these considerations and others, I think that filing was a curious move.

 

I wonder if maybe they were getting close to a big deal or merger with a large stock component and now it's in peril because of the low stock price.

 

I believe they stuck to things where there was a clear cut fact to be corrected. "Organic growth was impacted by X%" "No, actually it was only by Y%", "They wouldn't take stock" "We never offered stock" "Hidden discontinued products significantly affect reported organic growth" "We disclose them and effect was 37bps", "They increased prices to meet guidance" "price increases were included in guidance", etc.

 

Things like how you present CAGR in a presentation (where, btw, they showed a line for every company so anyone could do the math) or how you report divisions are more decisions based on a judgement that someone made. Maybe they made the wrong decisions or made mistakes, or maybe they made the right ones based on things that are less visible from the outside (going from a small cap to a megacap in a few years, integrating many businesses worldwide, maybe they needed to change the divisional reporting for reasons having to do with how they actually manage things), but this is not really the kind of stuff you can factually rebut, you can just talk about the reasons why you did it.

 

Maybe they'll discuss those things on the next conference call, we'll see.

 

I don't know how I feel about the 8K. The pros seem to be shocked that a big company would lower itself to address short sellers and bloggers. The attitude seems to be, unless you get attacked in the WSJ or on CNBC, you should keep a stately detachment and not bother. There's probably some wisdom to that. But on the other hand, it's 2015, not 1985. Some narratives get traction and go parabolic, and blog posts can nowadays get in front of just as many important people as a newspaper piece did back then. No need to buy ink by the barrel anymore. So maybe it's not such a bad idea to put some facts out there quickly in those situations, especially if there's a chance that if you wait weeks or months before defending yourself the narrative will just become accepted as fact in the meantime and the real business could be hurt (ie. big merger falls through because of low stock price, employee morale and retention affected, etc). I don't know what the best thing to do was...

[ScottHall]

I own shares as well but the behavior of some people here is ridiculous. I don't really think mocking a guy for his blog post is productive; it may make him decide not to write anymore. And maybe he will have compelling points to make in the future.

 

We all make mistakes in investing, so there really is no need to butcher AZ over this.

[ccplz]

I added to my small position yesterday and today. The bear thesis, as I understand it:

 

Debt: High debt levels. Business model only works due to low interest rates

Liquidity: company will have a liquidity crisis in 2018.

Fraud: public disclosures are inaccurate, specifically IRR.  The promised returns are just not possible.

Trust: Pearson is a slick McKinsey alumni.

Durability: Pharma products aren't durable, so adding back amortization is inaccurate

Pricing: Organic growth is driven solely by pricing

Regulatory risk: Clinton will stop price gouging.

Moral: It is immoral for a company to raise prices AND slash R&D.

Too Big: Company will find it harder to make meaningful acquisitions.

Arbitrage: By buying R&D, company is capitalizing instead of expensing R&D.

Tax arbitrage: Company evades taxes, by moving IP offshore.

R&D: Company slashes R&D, so products will inevitably fall off a cliff.

GAAP/FCF: Cash EPS doesn't reflect actual economics.

Expensive: Stock is expensive, if you don't believe in Cash EPS

 

This is actually the weakness in the bear case. They don't have a strong case so they are trying to overcome this weakness by attacking on multiple fronts. There are significant risks, so I will keep this as a small position.

 

Note: I am not posting this to fuel further debate, merely to justify why I have went from bearish to bullish on this stock.

 

Where's the weakness?

[Picasso]

I'm pretty sure AZ will keep writing.  He'll get a couple more 8-K's for each one that he puts out.  It would be nice if AZ actually addressed rebuttals to his analysis (I guess only Valeant isn't allowed to response to false information), but he seems to go dark rather than address what could be a decent argument.  Same thing happened when he excluded dividends from the Fairfax analysis and just didn't care to correct that information.  It would also help if some of us on this board weren't so adverse to the opposite point of view.

 

By the way, Ackman seemed a little nervous during that Bloomberg interview today.  He was trying hard to channel his inner Warren Buffett (i.e., people will eat more Oreo's in the future).  Maybe it was just me though.

 

I am a little concerned that Valeant stated the use of a terminal value on the IRR.  We already figured out that their definition of cash is EBITA, which fits into their unlevered returns.  The levered returns are a different story and it's shown in the massive increase in the stock price/cash from ops from 2008.

 

Between the IRR usage and a couple weird slides (like the one showing all the cumulative net income, the non-weighted averages), it makes me think that maybe the CFO/ex-CFO isn't the sharpest tool in the shed.  Who puts out a slide of net income when you really mean adjusted net income?  Valeant definitely needs to improve the quality of their statements, imo.

[Picasso]

By the way all the IRR stuff is kind of useless from the standpoint of figuring out our levered returns.  They use it in their deal model to figure out their future EBITA and debt capacity, but the stock is another story.

 

For example, look at operating cash flow in 2008: $204 million.  Operating cash flow for 2016 should be around $4 billion.  That is a 45% CAGR in operating cash flows which takes into account interest payments.

 

Shares over that time frame (assuming no more deals) only went up by 11.8% a year.  So I just don't see how the company is trying to lift up their stock price to keep the acquisition spree going.  Pearson cares from his compensation standpoint, but not nearly as much from an acquisition currency.  Especially at 10x cash EPS.  It wasn't relevant in the past, why is it so relevant now?  Are people expecting Valeant to see a sudden drop in operating cash flows and the debt market shuts them out? 

 

Anyway, I just wanted to point out that audited financials of the actual cash flows point to much better returns than the 20% deal model that seem to make people go nuts.  And the stock performance has been roughly in line with the growth in operating cash flows.

[jschembs]

What's an IRR?

[ZenaidaMacroura]

By the way all the IRR stuff is kind of useless from the standpoint of figuring out our levered returns.  They use it in their deal model to figure out their future EBITA and debt capacity, but the stock is another story.

 

For example, look at operating cash flow in 2008: $204 million.  Operating cash flow for 2016 should be around $4 billion.  That is a 45% CAGR in operating cash flows which takes into account interest payments.

 

Shares over that time frame (assuming no more deals) only went up by 11.8% a year.  So I just don't see how the company is trying to lift up their stock price to keep the acquisition spree going.  Pearson cares from his compensation standpoint, but not nearly as much from an acquisition currency.  Especially at 10x cash EPS.  It wasn't relevant in the past, why is it so relevant now?  Are people expecting Valeant to see a sudden drop in operating cash flows and the debt market shuts them out? 

 

Anyway, I just wanted to point out that audited financials of the actual cash flows point to much better returns than the 20% deal model that seem to make people go nuts.  And the stock performance has been roughly in line with the growth in operating cash flows.

 

Isn't atleast part of the reason the stock performance will lag the IRR or cash flow or [insert operating metric] because some of the acquisitions have an equity component?  Sure cash flows are growing at an impressive clip but if you were a 1% owner of the biz in 2008 you own less than that now.  Pearson judiciously uses both equity and debt so while the co is certainly growing it's paying for part of it by giving up some of the ownership.

[NBL0303]

I don't agree with every point AZ Value is making, but I applaud his writing and research in the sense that AZ is very clearly a passionate and thoughtful value investor and good researcher and anyone who publishes a work that serious and detailed makes us all better.

[Picasso]

Zenaida, that's why I mentioned the difference in share count.  Instead of owning 1% you'd own about half of that, but your stake is generating around 10x as much in free cash per share.

[ZenaidaMacroura]

Zenaida, that's why I mentioned the difference in share count.  Instead of owning 1% you'd own about half of that, but your stake is generating around 10x as much in free cash per share.

Ah, I misread the original quote.

[LongHaul]

I don't agree with every point AZ Value is making, but I applaud his writing and research in the sense that AZ is very clearly a passionate and thoughtful value investor and good researcher and anyone who publishes a work that serious and detailed makes us all better.

 

I 100% agree. 

 

I also agree that there is absolutely no need to be rude to other posters. 

[original mungerville]

Just to be clear, most of the time I am calm and try to be logical and rational (to the best of my abilities). However, in rare cases I get hyper/pissed, and I have done so on this thread in the past month or so - not because of an opposing opinion backed by an earnest effort at analysis, I welcome that as it does make us all better.

 

No I get unhappy in the following situations:

 

1. When I believe its not a mistake in the analysis, instead that the analysis was purposely put together to knowingly mislead. Usually this obfuscation is delivered by an intelligent individual leading the charge. Also less intelligent individuals can be used to mindlessly post rambling replies which make no sense.

 

2. When we can't agree on simple stuff like 1+1 = 2 or that a truncated IRR on a business usually has a terminal value in the last year. Because if we can't agree on basic/fundamental principles, how are we supposed advance and have a broader conversation on more important high level stuff like the business model? 

 

And #1 gets me a lot more pissed off than #2 (#2 is just an annoyance).

 

So to people who are maybe a little newer to this game or who were not members on the original board and didn't go through those experiences thinking I am being rude, maybe you are right and on top of that, I can tell you that 15 years ago, I would have agreed with you. But 15 years ago, I did not fully consider how this game works and that #1 can happen, and it can be far more organized than you would originally have thought possible (for example, don't assume the government, customers, debt markets can not be influenced by it when it is organized). So I understand your viewpoints totally. From your perspective those are fully warranted. I was there.

 

From my perspective now with that experience behind me, however, I believe #1 may be happening here.  I am not 100% sure about #1 in this thread, but I am a very good judge of character and pick-up small hints very quickly. On a scale of zero to what we went through on the original board, we are only at 20% at this stage - but that was enough to wipe out 1) 5-10 billion of market cap (the other 10-15 billion would probably have happened anyway due to the biotech and junk bond/platform co sell-off), 2) caused certain sincere posters of ours to, at the margin, question their investment and even sell.

 

I am not saying I am 100% certain, but I am personally past 50% on this - that's why I am getting agitated. So just consider the possibility, not the certainty, of the above. If you see continuous mistakes in analysis or reasoning repeated or if you see a highly intelligent analyst build a case using misleading data and/or analysis, do not always assume they are honest mistakes - that is, unfortunately, being far too gullible in this world. Having said all this, I have been wrong on character before - not often, but it has happened. I can certainly be wrong here - I hope I am.

 

 

 

 

 

[ccplz]

It doesn't have to be a bull circle jerk. You can tell us all the reasons why it's over priced.  I certainly have in the past and I've grown a lot more comfortable with certain risks. The big drop in price certainly took care of a few of them.

 

I agree. So I would like now to post some of my thoughts on the company, and understand what exactly it is that the bulls see in this company. I admit I have not done a deep dive into the filings nor have I looked into the company more closely like some other members here have done, so forgive me if I make a mistake somewhere.

 

What I see is this:

 

- A roll-up that depends on acquisitions for growth. This isn't sustainable because 1) the larger it gets, the harder it is to move the needle, 2) VRX is restricted to the pharmaceutical/healthcare products sector, so comparisons to Berkshire are inane, since Berkshire is only limited by Buffett's circle of competence. Roll-ups are also harder to analyze since there are so many moving parts and things are changing so quickly, and VRX does not seem like a particular transparent roll-up at that.

 

- Debt is at around 30.3 bn, total assets is at 48 bn, with goodwill at 17 bn and intangible assets at 23 bn. That's a huge red flag for me. There is only around 950 mn in cash and 2 bn in receivables on the books. How is the company supposed to service this debt? Refinancing once rates increase?

 

- Led by Mikey Pearson, who supposedly is a top class operator-manager in the mould of Malone, Buffett etc. but where is the evidence for that? Ackman's words? Certainly not in the company's financials. Pearson has supposedly done an outstanding job 'cutting the fat', reducing expenses in areas where it can be reduced, and spent next to nothing on R&D, actions that should benefit GAAP bottom line yet the company is still not GAAP profitable, and operating income is incredibly mediocre for a company with a 50-60 bn market capitalization.

 

The majority of R&D is expensed in the income statement, yet most pharma/(the big) biotech companies still manage to turn a GAAP profit. VRX is spending a lot on acquisitions, essentially what they are doing is capitalizing R&D, so that you don't see the expense on the income statement, yet they still fail to turn a GAAP profit!

 

Pearson states that R&D is a low ROI use of capital, and his model of acquiring firms instead should yield higher return on investment. Yet VRX has spent around 40 bn on acquisitions since 2010 (give or take a couple of billion), very real cash out-flows that are not reflected on the income statement, and are still GAAP unprofitable whilst a firm like Biogen has spent 9 bn on R&D since 2010, an amount which is included in the income statement, and they will be making 3.8bn a year in GAAP profits for 2015. Yet it is VRX that is supposed to have the superior model here? Something smells funny and I'm not going to eat it.

 

- Sales grew by 25% for the first half of 2014, and this is with all the acquisitions Pearson is doing, and operating income grew by around 24% but expenses grew by around 25% as well. Not sure where profitability is supposed to come from; I'm not seeing much operating leverage in the business model. Without the acquisitions, organic growth would be nowhere near that figure. Pearson is essentially spending a lot to buy revenue, trying to cut expenses and leveraging to the hilt to do this.

25% growth is not explosive btw; this isn't a tech company a la Google or Facebook in their early days, or a company like CMG that had phenomenal organic growth and so deserved a higher multiple..

 

- I laugh when Pearson talks about cash earnings/Adjusted EBITDA.

"It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it.

We won't buy into companies where someone's talking about EBITDA. If you look at all companies, and split them into companies that use EBITDA as a metric and those that don't, I suspect you'll find a lot more fraud in the former group. Look at companies like Wal-Mart, GE and Microsoft -- they'll never use EBITDA in their annual report.

People who use EBITDA are either trying to con you or they're conning themselves. Telecoms, for example, spend every dime that's coming in. Interest and taxes are real costs."

 

Anyways I'm sure these are all issues you have considered...so I am very curious as to what you bulls see in this company.

 

I mean, 'I am investing in VRX because I trust that Pearson is a top-class operator-owner and capital allocator because Ackman says he is and because he claims himself to be' is an extremely flimsy investment thesis.

 

Thanks.

[original mungerville]

I am really surprised by a few things regarding Valeant's response to criticisms filed yesterday.

 

First, like others have said - why do it? And why do it in that format?  It at least makes it seem like they care very much about their short-term stock price.  I realize that many shareholders would like some companies to care more about their short-term share prices, but this seems extreme to do an extraordinary filing of this nature.

 

Second, I do not think responding to specifics in that way is wise.  It would be better tactically to send Mike Pearson on CNBC for an interview "unrelated" to recent stock price movements and bring up some of these rebuttals in that venue.  But this kind of thing sort of brings attention to those specific reports/blogs and keeps them in the discussion for longer and kind of brings you down into the mud.

 

Third, it is surprising that Valeant responded to just those four points on AZ Value' blog.  Does that mean that it is conceding that all the rest of them are true?  Of course not, but why even open the door to that kind of argument by responding in this specific tit-for-tat way.  Additionally, in my mind at least, they responded to some of AZ Value's points that weren't nearly the most salient.  What about the more central points about the evolving changes in reporting numbers/lack of certain meaningful figures in their Annual Reports/clearly misleading slides in some cases (using unweighted averages/etc.)?

 

It is not really a big deal but given these considerations and others, I think that filing was a curious move.

 

I wonder if maybe they were getting close to a big deal or merger with a large stock component and now it's in peril because of the low stock price.

 

I believe they stuck to things where there was a clear cut fact to be corrected. "Organic growth was impacted by X%" "No, actually it was only by Y%", "They wouldn't take stock" "We never offered stock" "Hidden discontinued products significantly affect reported organic growth" "We disclose them and effect was 37bps", "They increased prices to meet guidance" "price increases were included in guidance", etc.

 

Things like how you present CAGR in a presentation (where, btw, they showed a line for every company so anyone could do the math) or how you report divisions are more decisions based on a judgement that someone made. Maybe they made the wrong decisions or made mistakes, or maybe they made the right ones based on things that are less visible from the outside (going from a small cap to a megacap in a few years, integrating many businesses worldwide, maybe they needed to change the divisional reporting for reasons having to do with how they actually manage things), but this is not really the kind of stuff you can factually rebut, you can just talk about the reasons why you did it.

 

Maybe they'll discuss those things on the next conference call, we'll see.

 

I don't know how I feel about the 8K. The pros seem to be shocked that a big company would lower itself to address short sellers and bloggers. The attitude seems to be, unless you get attacked in the WSJ or on CNBC, you should keep a stately detachment and not bother. There's probably some wisdom to that. But on the other hand, it's 2015, not 1985. Some narratives get traction and go parabolic, and blog posts can nowadays get in front of just as many important people as a newspaper piece did back then. No need to buy ink by the barrel anymore. So maybe it's not such a bad idea to put some facts out there quickly in those situations, especially if there's a chance that if you wait weeks or months before defending yourself the narrative will just become accepted as fact in the meantime and the real business could be hurt (ie. big merger falls through because of low stock price, employee morale and retention affected, etc). I don't know what the best thing to do was...

 

They are not necessarily responding to prop up the share price although that could be one driver or there could be a deal they were looking at. They could also be responding to prop up debt pricing, or to ensure their customer base and/or government relations are not unduly influenced by misinformation.

 

In my view, the latter are more important/core to their business model than the former - this is why I disagreed with Tombgrt's comment to an extent. They have used some equity (and they tried to use a lot by merging with Allergan because the synergies were so important), but most of their recent deals have been done with debt. Of course most management's do care when their stock drops 40%.

 

But they can just reinvest current cash flows into new acquisitions and debt refinancing/repayment and their business model would be fine and highly rewarding to shareholders.

[loganc]

@ccplz  I have another short for you - Liberty Global is a huge rollup of cable assets and can't show a GAAP profit.  On a similar note, how much GAAP profit do you think was reported during Malone's tenure at TCI?

[ccplz]

Firstly, cable is not comparable with pharma.

 

Secondly, you can cite one example of a company emphasizing EBITDA as a metric that tracks the true economics of the company that has done well; I can name dozens that were frauds.

 

What's your point?

 

That was a quote from Buffett btw.

 

[original mungerville]

And please don't look at Berkshire's GAAP profit to decide whether or not to invest. Buffett doesn't. He tells us about "look through earnings", he also talks about a two column method to valuing the company - only one of which is related to GAAP profits.

 

 

[ccplz]

"We attempt to offset the shortcomings of conventional accounting by regularly reporting "look-through" earnings (though, for special and nonrecurring reasons, we occasionally omit them). The look-through numbers include Berkshire's own reported operating earnings, excluding capital gains and purchase-accounting adjustments (an explanation of which occurs later in this message) plus Berkshire's share of the undistributed earnings of our major investees - amounts that are not included in Berkshire's figures under conventional accounting. From these undistributed earnings of our investees we subtract the tax we would have owed had the earnings been paid to us as dividends. We also exclude capital gains, purchase-accounting adjustments and extraordinary charges or credits from the investee numbers."

 

How is this relevant to Valeant? Does Valeant use look through earnings? Valeant's adjusted EBITDA / cash earnings is calculated differently from Berkshire's look through earnings. Do you accept any and all adjustments to GAAP figures for all companies, or is Valeant just a very special case? And if they are, would you please enlighten as to why?

 

Also why are you comparing Pearson to Buffett? Does Pearson have Buffett's long track record, or Buffett's well-earned reputation for integrity and transparency? Do they have similar philosophies?

 

Why are you comparing them?

[loganc]

Firstly, cable is not comparable with pharma.

 

Secondly, you can cite one example of a company emphasizing EBITDA as a metric that tracks the true economics of the company that has done well; I can name dozens that were frauds.

 

What's your point?

 

That was a quote from Buffett btw.

 

My point is that you are fixated on GAAP profits.  I think that is a very weak short thesis.  Good luck.

 

 

[original mungerville]

Firstly, cable is not comparable with pharma.

 

Secondly, you can cite one example of a company emphasizing EBITDA as a metric that tracks the true economics of the company that has done well; I can name dozens that were frauds.

 

What's your point?

 

That was a quote from Buffett btw.

 

Berkshire is another, Fairfax is a third, most successful platform companies would be other examples. It is probably fair to say dozens were frauds for every one that was not. Just like it is fair to say that dozens of investments earn average or near-average returns for every one that earns a tremendous amount.

 

 

[ccplz]

My point is that you are fixated on GAAP profits.  I think that is a very weak short thesis.  Good luck.

 

GAAP profits are comparable. I find Pearson's metrics to be disingenuous, and i do not believe they accurately reflect the firm's economics (at least more than GAAP figures do). Moreover, it doesn't make sense to me as to why GAAP net income, or even GAAP operating income (that is, before interest) is so low, given the fact that Pearson is playing accounting games by essentially capitalizing R&D. Firms that capitalize R&D usually do so in order to inflate GAAP EPS; Valeant cannot even claim to be able to do that.

 

But hey, you are free to prove me wrong. Show me why that is a weak argument.

 

I am not short by the way, and that is not a short thesis. I have not done enough work on the company to be able to take a position either way; however the risk-reward just doesn't seem to be there for me.

 

Berkshire is another, Fairfax is a third, most successful platform companies would be other examples. It is probably fair to say dozens were frauds for every one that was not. Just like it is fair to say that dozens of investments earn average or near-average returns for every one that earns a tremendous amount.

 

I don't know anything about Fairfax, but a focus on adjusted EBITDA is a bit of a red flag for me. This is something that Buffett espouses as well.

 

I would not say Buffett focuses entirely on non-GAAP figures... he puts a lot of stock on GAAP figures as well. One has to judge which one is more suitable depending on the situation.

 

Now please can we get away from Berkshire/Liberty/Fairfax and get back to Valeant. Tell me why cash earnings/Pearson's adjusted EBITDA tracks the true economics of the business better than GAAP earnings/GAAP operating income. Do you even know why? Or are you just following Ackman / Pearson?

[original mungerville]

Firstly, cable is not comparable with pharma.

 

Secondly, you can cite one example of a company emphasizing EBITDA as a metric that tracks the true economics of the company that has done well; I can name dozens that were frauds.

 

What's your point?

 

That was a quote from Buffett btw.

 

Berkshire is another, Fairfax is a third, most successful platform companies would be other examples. It is probably fair to say dozens were frauds for every one that was not. Just like it is fair to say that dozens of investments earn average or near-average returns for every one that earns a tremendous amount.

 

I am talking about referencing non-GAAP profits more generally, not EBITDA. And just to be clear, Valeant does not emphasize EBITDA because the I and the T are included in their key income metric.

[ccplz]

I am talking about referencing non-GAAP profits more generally, not EBITDA. And just to be clear, Valeant does not emphasize EBITDA because the I and the T are included in their key income metric.

 

Ok. Ackman emphasizes VRX's adjusted EBITDA figures in his presentations, and so does Pearson in the 10-k.

 

So what do you think is their key income metric? How is it calculated? And why do you think it tracks the true economics better than GAAP figures?

[Picasso]

I've been short for the last month, so I'm happy  ;)

 

I thought you were short?  At any rate its good that you listed out your negative views so that we can see whether it makes sense or not.