VRX - Valeant Pharmaceuticals International Inc.

[tylerdurden]

That said, I am not convinced Valeant mgmt did not know what was going on a Philidor. I would be surprised if it made it all the way to the c-suite though. We have all said that the bet has been on Pearson being honest. If we are wrong on that, we will be wrong on this investment. If middle management at Valeant is involved, I maintain fines will not be larger than .5 billion and definitely not more than $1B with my most likely scenario low 100 millions.

OM, I don't see why it's hard to believe that the goings on at Philidor were known to the c-suite. It's obvious that the reason for Philidor was to be aggressive in filling prescriptions with Valeant drugs. Valeant paid 100 million for control of Philidor. That amount of money must get approval from the CEO. So it looks like the C-suite was aware.

 

Yes, I won't dispute that. Its just there is a whole gradation of awareness which can span aggressiveness (ie could be the reason for the option structure, or maybe they actually did not feel comfortable with regulations of the distribution business) all the way to illegalities. I am not ruling out that that deal was done with aggressiveness in mind, but the reason provided by the ex-CFO also seems plausible. Illegalities could have mushroomed over the course of the year with the mgmt incentive structure at Philidor. Think about how this thing went from nothing to $100M valuation plus another $133 in incentives. Certainly one could argue that the $100M was for the licenses, aggressiveness, and exclusivity (not all speciality pharmas offer exclusivity), then the other $133 incentive structure just sent the Philidor guys over the top and illegalities mushroomed quickly within months.

Can "exclusivity" worth $100M to VRX? My impression is that there is nothing special about Philidor that VRX should have paid that amount just to get their total focus for selling their products. Unless of course that selling is more "pushing" through some unethical tactics at the very least. Anyways, I just saw another WSJ article in which a spokeperson for the specialty pharmacy association said Philidor should not be considered as a specialty pharmacy even because all they were doing selling "acne" medicine just specifically for one customer only. Philidor was probably special for VRX worth of $100M because they were not going to take "no for answer". Exclusivity argument is total BS.

[rb]

That said, I am not convinced Valeant mgmt did not know what was going on a Philidor. I would be surprised if it made it all the way to the c-suite though. We have all said that the bet has been on Pearson being honest. If we are wrong on that, we will be wrong on this investment. If middle management at Valeant is involved, I maintain fines will not be larger than .5 billion and definitely not more than $1B with my most likely scenario low 100 millions.

OM, I don't see why it's hard to believe that the goings on at Philidor were known to the c-suite. It's obvious that the reason for Philidor was to be aggressive in filling prescriptions with Valeant drugs. Valeant paid 100 million for control of Philidor. That amount of money must get approval from the CEO. So it looks like the C-suite was aware.

 

Yes, I won't dispute that. Its just there is a whole gradation of awareness which can span aggressiveness (ie could be the reason for the option structure, or maybe they actually did not feel comfortable with regulations of the distribution business) all the way to illegalities. I am not ruling out that that deal was done with aggressiveness in mind, but the reason provided by the ex-CFO also seems plausible. Illegalities could have mushroomed over the course of the year with the mgmt incentive structure at Philidor. Think about how this thing went from nothing to $100M valuation plus another $133 in incentives. Certainly one could argue that the $100M was for the licenses, aggressiveness, and exclusivity (not all speciality pharmas offer exclusivity), then the other $133 incentive structure just sent the Philidor guys over the top and illegalities mushroomed quickly within months.

I think I get the idea in your post (if I'm wrong I apologize). But I think you're kinda on the right track. As I've said previously. It doesn't really matter in senior management knew what was going on or not. They've approved the funds and set up the incentives in such a way that it was almost inevitable for something like this to happen. Whether they signed off on it or not is merely semantics. The reason why you set up this sort of structure is for plausible deniability as well.

 

What's also interesting to me is that if Valeant was personified into an individual, I believe that almost nobody on this board and most of its investors would not want to be his partner. Yet a lot of the same people became a partner just because the entity was only a ticker. When the bad news comes out some double down, others rationally re-evaluate.

 

I don't know if there's money to be made here. I don't trust management presentations and the financials are impossible. But instinct tells me that there is. I don't know if at this price level but definitely at a lower level. The fact is that we do not know how much of valeant's profits come from aggressive and unethical tactics. We don't even know if their model works if they were to drop those tactics.

[shalab]

If WSJ article is true (Valeant employees using pseudonyms and working in Philidor), given the Philidor volumes, I dont know how management wouldnt be aware.

 

That said, management will never acknowledge they knew - ala Volkswagen.  I expect Valueact to take some step to salvage their image and dollars. ( and take steps to re-assure the fidgety investors )

 

That said, I am not convinced Valeant mgmt did not know what was going on a Philidor. I would be surprised if it made it all the way to the c-suite though. We have all said that the bet has been on Pearson being honest. If we are wrong on that, we will be wrong on this investment. If middle management at Valeant is involved, I maintain fines will not be larger than .5 billion and definitely not more than $1B with my most likely scenario low 100 millions.

OM, I don't see why it's hard to believe that the goings on at Philidor were known to the c-suite. It's obvious that the reason for Philidor was to be aggressive in filling prescriptions with Valeant drugs. Valeant paid 100 million for control of Philidor. That amount of money must get approval from the CEO. So it looks like the C-suite was aware.

 

Yes, I won't dispute that. Its just there is a whole gradation of awareness which can span aggressiveness (ie could be the reason for the option structure, or maybe they actually did not feel comfortable with regulations of the distribution business) all the way to illegalities. I am not ruling out that that deal was done with aggressiveness in mind, but the reason provided by the ex-CFO also seems plausible. Illegalities could have mushroomed over the course of the year with the mgmt incentive structure at Philidor. Think about how this thing went from nothing to $100M valuation plus another $133 in incentives. Certainly one could argue that the $100M was for the licenses, aggressiveness, and exclusivity (not all speciality pharmas offer exclusivity), then the other $133 incentive structure just sent the Philidor guys over the top and illegalities mushroomed quickly within months.

[rb]

If WSJ article is true (Valeant employees using pseudonyms and working in Philidor), given the Philidor volumes, I dont know how management wouldnt be aware.

 

That said, management will never acknowledge they knew - ala Volkswagen.  I expect Valueact to take some step to salvage their image and dollars. ( and take steps to re-assure the fidgety investors )

Not to pick on you, but what exactly do you think that valueact can do?

[original mungerville]

 

 

Tombgrt,

 

I am glad we are amusing for you.

 

That said, I am not convinced Valeant mgmt did not know what was going on a Philidor. I would be surprised if it made it all the way to the c-suite though. We have all said that the bet has been on Pearson being honest. If we are wrong on that, we will be wrong on this investment. If middle management at Valeant is involved, I maintain fines will not be larger than .5 billion and definitely not more than $1B with my most likely scenario low 100 millions.

 

I know hard to quantify at this point but hard for me to believe the legal fine would be the only financial impact on VRX.

 

Only financial impact? No, 5% of sales are gone, a % of ongoing growth is gone. Furthermore, their debt is more expensive to issue, and 50 billion plus of market cap is gone. And that assumes there are no more cockroaches.

 

That's one way of looking at it.  On the other hand, they won't be doing any acquisitions soon anyways so don't need to tap the debt markets in the short term, so I'd frame it as their debt is now cheaper to repay.  They can deliver much more rapidly when their debt trades at a 10-15% discount to par.

 

There is $61 billion in enterprise value right now.  Let's say a fair multiple on whatever cash flow there is when this storm passes is 15x unlevered free cash flow.  I think a discount to the levered market multiple is fairly conservative for an industry that typically trades at a premium to the market on levered earnings.  So to make this valuation fair, you need $4 billion in free cash flow unlevered.  With the tax rate and low capex requirements, that means you need about $4.5 billion in EBITDA. That's a 40% discount to guidance. Philidor is 7% of sales and a lot of that will just get diverted to other channels.

 

Even if Pearson is found to be personally involved in Philidor, who cares at $90?

 

But I highly doubt there will be any smoking gun evidence that Pearson was involved.  A) because his incentives give him no reason to engage in fraud to boost short term results and B) because even if he was stupid enough  to do it you also need to believe he was stupid enough to commit fraud in a way that could be traced back to him.  We'll see on Monday.

 

Agree and good post. I have been thinking the same thing: at a certain price, none of this matters and I agree we may be near that price. I was just trying to demonstrate to the other poster that in no way do I think the fine is the only issue. In fact the fine is the only non-issue.

[original mungerville]

Oh come on are you serious? That's ridiculous! There is lots of evidence that they were running the operations of Philidor even if they didn't TECHNICALLY own it. The name alone (chess reference) makes it entirely obvious.

 

If you have (former?) employees working there, "joint steering committee" etc, and an OPTION STRUCK AT ZERO DOLLARS, then you are running that business. It is as simple as that.

 

The only reason to use an option struck at zero and not make an outright purchase is if you are trying to hide ownership from someone. If you say anything else you are totally deluded. Wake up from your slumber here and see the light of day.

 

The important question is materiality-- what's the actual effect on the business. Still ZERO people have tried to actually lay out all the ways Valeants products are distributed and try to see which ones could be affected.

 

I'll give you a start-- contact lenses are probably not affected. Sales through wholesalers and then through retail are probably not affected. I believe that already accounts for the majority of US sales. What about the rest? What about Europe?

 

I'm not saying they didn't have ultimate control over the entity's destiny. I'm saying that it's one thing to have high level, strategic control (of the kind of "we should get distribution in states X, Y and Z... we will invest in more staff to add two new products in 6 months...") and to have day-to-day control over how employees are trained, how they're told to fill out form, compliance, etc.

 

Maybe Valeant knew about everything and told them to do it. I don't know. But I think it's also plausible that Philidor management committed fraud to get their earnouts without the knowledge of Valeant. The net worth of Andrew Davenport and his cronies might double if they get those earnouts, so that's certainly an incentive for someone unscrupulous. But Valeant was doing quite well long before Philidor was ever on the scene, these tactics were worth at most a couple points of growth (I'm sure a lot of the 6-7% was legit, and if Philidor hadn't existed, it would've gone through other channels -- after all, doctors do prescribe the stuff), and the downside is huge...

 

So maybe they did it, I don't know. But I think right now a lot of people are ready to put handcuffs on management with very few hard facts.

 

My impression from WSJ/Bloomberg articles is that Philidor training materials have VRX products explicitly defined and tell employees how not to take no for an answer. Anyways no one can say 100% for sure but my gut says they were pretty much involved in day to day operations.

 

It seems VRX was doing fine before Philidor but wasn't Philidor still one of the key component of their growth story? Don't know, perhaps they were out of options with acquisitions etc. so Philidor was the next big thing for them...

 

The doctor prescribed the drug, and you can be damn sure the call center manuals try to ensure that nobody takes "no" for an answer. Have you ever worked at a call center? Every fuckin' one of them has manuals that tell employees how not to take "no" for an answer. If Philidor took that too far in their manuals and broke the law, it doesn't mean Pearson knew about it.

 

Out of options for acquisitions? Uh...no.

[rb]

Right they'll do a lot of acquisitions with their current credit rating.

[tylerdurden]

Oh come on are you serious? That's ridiculous! There is lots of evidence that they were running the operations of Philidor even if they didn't TECHNICALLY own it. The name alone (chess reference) makes it entirely obvious.

 

If you have (former?) employees working there, "joint steering committee" etc, and an OPTION STRUCK AT ZERO DOLLARS, then you are running that business. It is as simple as that.

 

The only reason to use an option struck at zero and not make an outright purchase is if you are trying to hide ownership from someone. If you say anything else you are totally deluded. Wake up from your slumber here and see the light of day.

 

The important question is materiality-- what's the actual effect on the business. Still ZERO people have tried to actually lay out all the ways Valeants products are distributed and try to see which ones could be affected.

 

I'll give you a start-- contact lenses are probably not affected. Sales through wholesalers and then through retail are probably not affected. I believe that already accounts for the majority of US sales. What about the rest? What about Europe?

 

I'm not saying they didn't have ultimate control over the entity's destiny. I'm saying that it's one thing to have high level, strategic control (of the kind of "we should get distribution in states X, Y and Z... we will invest in more staff to add two new products in 6 months...") and to have day-to-day control over how employees are trained, how they're told to fill out form, compliance, etc.

 

Maybe Valeant knew about everything and told them to do it. I don't know. But I think it's also plausible that Philidor management committed fraud to get their earnouts without the knowledge of Valeant. The net worth of Andrew Davenport and his cronies might double if they get those earnouts, so that's certainly an incentive for someone unscrupulous. But Valeant was doing quite well long before Philidor was ever on the scene, these tactics were worth at most a couple points of growth (I'm sure a lot of the 6-7% was legit, and if Philidor hadn't existed, it would've gone through other channels -- after all, doctors do prescribe the stuff), and the downside is huge...

 

So maybe they did it, I don't know. But I think right now a lot of people are ready to put handcuffs on management with very few hard facts.

 

My impression from WSJ/Bloomberg articles is that Philidor training materials have VRX products explicitly defined and tell employees how not to take no for an answer. Anyways no one can say 100% for sure but my gut says they were pretty much involved in day to day operations.

 

It seems VRX was doing fine before Philidor but wasn't Philidor still one of the key component of their growth story? Don't know, perhaps they were out of options with acquisitions etc. so Philidor was the next big thing for them...

 

The doctor prescribed the drug, and you can be damn sure the call center manuals try to ensure that nobody takes "no" for an answer. Have you ever worked at a call center? Every fuckin' one of them has manuals that tell employees how not to take "no" for an answer. If Philidor took that too far in their manuals and broke the law, it doesn't mean Pearson knew about it.

 

Out of options for acquisitions? Uh...no.

Sorry but what is your argument here? Are you defending the practices at Philidor as normal business at any call center or your argument is "as long as Person does not know" we'll go back living in wonderland again and everything would be fine. I don't buy either of those arguments.

[feynmanresearch]

Right they'll do a lot of acquisitions with their current credit rating.

+1

[Picasso]

Valeant bonds are now yielding 10% or so.  Sort of tricky to delever when you locked in 6% or lower.  You also increase the cash tax rate but it seems like most valuations put a terminal cash tax rate at low double digits.

 

If you read through the lines of the Sequoia letter it's fairly clear that they are openly stating their desire for debt repayment.  That seems odd because if the business is so great (low capex, durability, organic growth, etc) it can maintain these leverage levels fairly easy.  They also locked in good rates on their termed out debt.  You'd think by the time debt came due this would resolve itself (growing EBITA, calmer market conditions, etc).

 

Will share buybacks be the preferred method of capital deployment here?  I'm starting to think that may not be the case.  Seems like maintaining/growing FCF is necessary to have the market value this on cash EPS.  Probably means a combination of debt repayment and smaller acquisitions with their cash. 

[Picasso]

To be perfectly honest, the call was really sad.  He spent half the time talking about how other pharmas do bad things and this shouldn't be that big of a fine.  Basically said he had no idea Philidor was a VIE until a couple weeks ago (they called Philidor during due diligence and they said no Valeant doesn't own us).  It was like a rehash of everything we already knew.

 

He mentioned he did a pep rally at the Valeant headquarters for 300 employees.  Also that he spoke to Schiller about Philidor and had a reasonable explanation for the arms length transaction.  Then he spent three hours answering a ton of questions.

 

Then he ended with the classic Buffett buy when others are fearful quote and brought up similarities to the Amex oil scandal.

 

The worst part: he said he used the last $200 million he could scrap together to buy more VRX shares because they're fully invested.  Why would he announce that to the shorts? 

[rb]

That's classic Ackman. When he has nothing useful to say he'll just talk at you until you give up.

[original mungerville]

Liberty, you may believe whatever you want. It seems that whenever there's any question raised about Valeant you always come out strongly in favour of VRX management. A week or so ago you were sure that nothing wrong was going on at Philidor. Now you seem pretty sure that C-suite didn't know anything about the wrong doing. So I don't know if you are or can be objective in your view of Valeant.

 

A week ago it seemed very likely that the original accusations, which were for channel stuffing and phantom pharmacies with fake sales, were wrong. And apparently they were. This is new stuff.

 

All I'm saying is that there are multiple plausible scenarios. A bunch of people immediately jump on "management knew", and I'm saying that the exact same circumstances that we're seeing right now could have arisen without management knowing.

 

Valeant is a company that is ultra-aggressive in pushing their drugs and making numbers, always going right to the line of what they can do and what's legal. In an environment like that is very easy to go over the line. That's why it's not hard to believe that top management knew or sanctioned it as opposed to some rogue middle manager. Also this totally looks like something that Valeant would do.

 

Maybe. But I think there's a difference between doing something that is clearly fraud - changing doctors prescriptions, if the media reports are accurate - and what I've seen Valeant do so far.

 

No Liberty, you are fuckin' wrong. Pearson knew, he's been at the call center the whole time - cubicle 1013, in fact. Right next to Peter Parker in cubicle 1014. After he wound down the Allergan acquisition from that cubicle, him and Parker went out for a night on the town. The next morning he woke up and decided he better refocus on operating the entire Valeant company from there, and after that and then getting bored over the next few months trying to get payers to pay for various doctor-prescribed medicines, and not taking "no" for an answer at the call center he said "fuck this shit, Parker you keep going girl, I got other shit to do", he then went after Salix - all from that same cubicle. His McKinsey ass has been in that call-center cubicle the whole time Liberty, you dumb shit. Take your head out of your ass and understand that Philidor was Valeant's only viable option for future global growth, understand that Valeant does not run a decentralized business model and that Pearson, despite running a company with thousands and thousands of employees, for sure knew exactly, I MEAN EXACTLY, what was going on on a day-to-day basis at Philidor. He is the type of guy that runs EVERYTHING. He knew they crossed the line between aggressiveness and illegality - HE WAS THERE THE WHOLE TIME. CLEARLY.

 

Speaking of McKinsey, how do you rise to the top of McKinsey's global pharma practice with directness, and lacking PR and communication abilities? There is only one possible answer: Bribes. There is no other way, clearly. It has to be bribes. Only bribes. Bribes.

 

He's an aggressive bribe-taking, control-freakin', never take "no" for an answer, Parker fondling, take-over addicted, Mckinsey call center hooer.

 

100% sure of that. And God bless Andrew Left.

 

 

 

[ourkid8]

Ackman also has to protect his interest in his hedge fund as I can guarantee investors are concerned with the large concentration in Valeant. 

 

The worst part: he said he used the last $200 million he could scrap together to buy more VRX shares because they're fully invested.  Why would he announce that to the shorts?

[rb]

 

No Liberty, you are fuckin' wrong. Pearson knew, he's been at the call center the whole time - cubicle 1013, in fact. Right next to Peter Parker in cubicle 1014. After he wound down the Allergan acquisition from that cubicle, him and Parker went out for a night on the town. The next morning he woke up and decided he better refocus on operating the entire Valeant company from there, and after that and then getting bored over the next few months trying to get payers to pay for various doctor-prescribed medicines, and not taking "no" for an answer at the call center he said "fuck this shit, Parker you keep going girl, I got other shit to do", he then went after Salix - all from that same cubicle. His McKinsey ass has been in that call-center cubicle the whole time Liberty, you dumb shit. Take your head out of your ass and understand that Philidor was Valeant's only viable option for future global growth, understand that Valeant does not run a decentralized business model and that Pearson, despite running a company with thousands and thousands of employees, for sure knew exactly, I MEAN EXACTLY, what was going on on a day-to-day basis at Philidor. He is the type of guy that runs EVERYTHING. He knew they crossed the line between aggressiveness and illegality - HE WAS THERE THE WHOLE TIME. CLEARLY.

 

Speaking of McKinsey, how do you rise to the top of McKinsey's global pharma practice with directness, and lacking PR and communication abilities? There is only one possible answer: Bribes. There is no other way, clearly. It has to be bribes. Only bribes. Bribes.

 

He's an aggressive bribe-taking, control-freakin', never take "no" for an answer, Parker fondling, take-over addicted, Mckinsey call center hooer.

 

100% sure of that. And God bless Andrew Left.

Wow, angry much?

[rb]

Ackman also has to protect his interest in his hedge fund as I can guarantee investors are concerned with the large concentration in Valeant. 

 

The worst part: he said he used the last $200 million he could scrap together to buy more VRX shares because they're fully invested.  Why would he announce that to the shorts?

How many other reputable long investors do you know that set up public conference calls to defend long positions they hold that have, effectively doing PR/IR for the company?

[Picasso]

No Liberty, you are fuckin' wrong. Pearson knew, he's been at the call center the whole time - cubicle 1013, in fact. Right next to Peter Parker in cubicle 1014. After he wound down the Allergan acquisition from that cubicle, him and Parker went out for a night on the town. The next morning he woke up and decided he better refocus on operating the entire Valeant company from there, and after that and then getting bored over the next few months trying to get payers to pay for various doctor-prescribed medicines, and not taking "no" for an answer at the call center he said "fuck this shit, Parker you keep going girl, I got other shit to do", he then went after Salix - all from that same cubicle. His McKinsey ass has been in that call-center cubicle the whole time Liberty, you dumb shit. Take your head out of your ass and understand that Philidor was Valeant's only viable option for future global growth, understand that Valeant does not run a decentralized business model and that Pearson, despite running a company with thousands and thousands of employees, for sure knew exactly, I MEAN EXACTLY, what was going on on a day-to-day basis at Philidor. He is the type of guy that runs EVERYTHING. He knew they crossed the line between aggressiveness and illegality - HE WAS THERE THE WHOLE TIME. CLEARLY.

 

Speaking of McKinsey, how do you rise to the top of McKinsey's global pharma practice with directness, and lacking PR and communication abilities? There is only one possible answer: Bribes. There is no other way, clearly. It has to be bribes. Only bribes. Bribes.

 

He's an aggressive bribe-taking, control-freakin', never take "no" for an answer, Parker fondling, take-over addicted, Mckinsey call center hooer.

 

100% sure of that. And God bless Andrew Left.

 

Oh my god, I'm dying over here. 

[ourkid8]

Again, he is protecting the interest in his investment which in turn is protecting the capital for his investors.  Right now the issue with Valeant is optics and Ackman is taking that responsibility thinking he can help... Do I agree with what he did or disagree, that's irrelevant to this topic.

 

Seqoia did not set-up a CC however that letter they released was in turn PR showing how they are onside with management.  That's exactly what Buffett would do in that scenario to show his support.  (Or potentially go on CNBC with Becky and show his support)

 

Ackman also has to protect his interest in his hedge fund as I can guarantee investors are concerned with the large concentration in Valeant. 

 

The worst part: he said he used the last $200 million he could scrap together to buy more VRX shares because they're fully invested.  Why would he announce that to the shorts?

How many other reputable long investors do you know that set up public conference calls to defend long positions they hold that have, effectively doing PR/IR for the company?

[rb]

Sequoia's letter basically says that they like the model but that management should shop going right to the edge of the letter of the law and start managing the company more responsibly.

 

Berkshire always expresses confidence in their investees but I don't think they've ever set up a press conference to defend one of their long public stocks in a problem such as this. In addition I don't think Berkshire would come within a hundred miles of Valeant and if they were in charge they would handle the situation very differently. And Ackman didn't go on CNBC. He effectively set up a press conference on behalf of Valeant.

[gary17]

Liberty, you may believe whatever you want. It seems that whenever there's any question raised about Valeant you always come out strongly in favour of VRX management. A week or so ago you were sure that nothing wrong was going on at Philidor. Now you seem pretty sure that C-suite didn't know anything about the wrong doing. So I don't know if you are or can be objective in your view of Valeant.

 

A week ago it seemed very likely that the original accusations, which were for channel stuffing and phantom pharmacies with fake sales, were wrong. And apparently they were. This is new stuff.

 

All I'm saying is that there are multiple plausible scenarios. A bunch of people immediately jump on "management knew", and I'm saying that the exact same circumstances that we're seeing right now could have arisen without management knowing.

 

Valeant is a company that is ultra-aggressive in pushing their drugs and making numbers, always going right to the line of what they can do and what's legal. In an environment like that is very easy to go over the line. That's why it's not hard to believe that top management knew or sanctioned it as opposed to some rogue middle manager. Also this totally looks like something that Valeant would do.

 

Maybe. But I think there's a difference between doing something that is clearly fraud - changing doctors prescriptions, if the media reports are accurate - and what I've seen Valeant do so far.

 

No Liberty, you are fuckin' wrong. Pearson knew, he's been at the call center the whole time - cubicle 1013, in fact. Right next to Peter Parker in cubicle 1014. After he wound down the Allergan acquisition from that cubicle, him and Parker went out for a night on the town. The next morning he woke up and decided he better refocus on operating the entire Valeant company from there, and after that and then getting bored over the next few months trying to get payers to pay for various doctor-prescribed medicines, and not taking "no" for an answer at the call center he said "fuck this shit, Parker you keep going girl, I got other shit to do", he then went after Salix - all from that same cubicle. His McKinsey ass has been in that call-center cubicle the whole time Liberty, you dumb shit. Take your head out of your ass and understand that Philidor was Valeant's only viable option for future global growth, understand that Valeant does not run a decentralized business model and that Pearson, despite running a company with thousands and thousands of employees, for sure knew exactly, I MEAN EXACTLY, what was going on on a day-to-day basis at Philidor. He is the type of guy that runs EVERYTHING. He knew they crossed the line between aggressiveness and illegality - HE WAS THERE THE WHOLE TIME. CLEARLY.

 

Speaking of McKinsey, how do you rise to the top of McKinsey's global pharma practice with directness, and lacking PR and communication abilities? There is only one possible answer: Bribes. There is no other way, clearly. It has to be bribes. Only bribes. Bribes.

 

He's an aggressive bribe-taking, control-freakin', never take "no" for an answer, Parker fondling, take-over addicted, Mckinsey call center hooer.

 

100% sure of that. And God bless Andrew Left.

 

is this sarcasm ?

[original mungerville]

Eventually we as shareholders have to stop excusing what management has led us to believe the last couple years. Either they are inept or intentionally misleading and neither of those two things reflect positively on Pearson. He's done a great job in different areas and perhaps some of this falls on the ex CFO, I'm not sure.

 

OM, have you looked at the gross versus net trend over the past two years?  Have you tried to calculate what it will take to incrementally grow profits from here?  It becomes fairly obvious that Philidor was a big part of the revenue growth along with something else I can't figure out. I can see why they didn't want to cut ties until the PBM's made the decision for them. They won't be able to make earnings without Philidor, period. That tailwind is gone and management has still not said anything about the effect to earnings. Cash EPS becomes useless if you see declines in the non Salix and B+L portfolio.

 

Start by assuming Pearson is not telling the truth and just look at the numbers and reallty. This stock becomes a lot harder to defend. Not that I know if he's lying or not, but at this point we need to verify everything.

 

In a worst case, I know one thing: Zero is not some magical number below which the world stops and all hell breaks loose. Its not like the full amortisation of intangibles starts to make sense and kicks in at negative 1% growth and therefore the business is a dud. 

 

Having said that, I don't see how we go negative revenue growth for more than a year; and I can't see how we go negative even for one year frankly. And I don't care if Valeant has low single digit growth overall, never have. And I don't see how they can have low single digit growth even without Philidor, instead growth would likely be at least mid-single digits.

 

Clearly they won't make $16 per share without Philidor (but don't forget that this target was set in early 2015 and currencies have moved against them significantly already). IF we did not have this currency movement, they would still have had a shot at making that even with this Philidor crap. Last time I checked, Salix is firing on all cylinders, and B&L is doing well.

 

I haven't run the slide ruler over the numbers, analyzing this gross to net, but how do you get to negative revenue growth ex-Philidor. (There will be restructuring costs, etc if they are going to give out prescriptions to patients for free as they cut ties with Philidor, but I can't see revenue growth overall going negative because of Philidor.)

[original mungerville]

Liberty, you may believe whatever you want. It seems that whenever there's any question raised about Valeant you always come out strongly in favour of VRX management. A week or so ago you were sure that nothing wrong was going on at Philidor. Now you seem pretty sure that C-suite didn't know anything about the wrong doing. So I don't know if you are or can be objective in your view of Valeant.

 

A week ago it seemed very likely that the original accusations, which were for channel stuffing and phantom pharmacies with fake sales, were wrong. And apparently they were. This is new stuff.

 

All I'm saying is that there are multiple plausible scenarios. A bunch of people immediately jump on "management knew", and I'm saying that the exact same circumstances that we're seeing right now could have arisen without management knowing.

 

Valeant is a company that is ultra-aggressive in pushing their drugs and making numbers, always going right to the line of what they can do and what's legal. In an environment like that is very easy to go over the line. That's why it's not hard to believe that top management knew or sanctioned it as opposed to some rogue middle manager. Also this totally looks like something that Valeant would do.

 

Maybe. But I think there's a difference between doing something that is clearly fraud - changing doctors prescriptions, if the media reports are accurate - and what I've seen Valeant do so far.

 

No Liberty, you are fuckin' wrong. Pearson knew, he's been at the call center the whole time - cubicle 1013, in fact. Right next to Peter Parker in cubicle 1014. After he wound down the Allergan acquisition from that cubicle, him and Parker went out for a night on the town. The next morning he woke up and decided he better refocus on operating the entire Valeant company from there, and after that and then getting bored over the next few months trying to get payers to pay for various doctor-prescribed medicines, and not taking "no" for an answer at the call center he said "fuck this shit, Parker you keep going girl, I got other shit to do", he then went after Salix - all from that same cubicle. His McKinsey ass has been in that call-center cubicle the whole time Liberty, you dumb shit. Take your head out of your ass and understand that Philidor was Valeant's only viable option for future global growth, understand that Valeant does not run a decentralized business model and that Pearson, despite running a company with thousands and thousands of employees, for sure knew exactly, I MEAN EXACTLY, what was going on on a day-to-day basis at Philidor. He is the type of guy that runs EVERYTHING. He knew they crossed the line between aggressiveness and illegality - HE WAS THERE THE WHOLE TIME. CLEARLY.

 

Speaking of McKinsey, how do you rise to the top of McKinsey's global pharma practice with directness, and lacking PR and communication abilities? There is only one possible answer: Bribes. There is no other way, clearly. It has to be bribes. Only bribes. Bribes.

 

He's an aggressive bribe-taking, control-freakin', never take "no" for an answer, Parker fondling, take-over addicted, Mckinsey call center hooer.

 

100% sure of that. And God bless Andrew Left.

 

is this sarcasm ?

 

Yes, but certainly not directed at rb's comments which are balanced. Its several people have been implying Liberty has his head up his ass for not jumping to conclusions that Pearson knew all about any illegalities at Philidor when there is no such evidence and other possible scenarios at this point. Again, not directed at rb.

[rb]

Yes, but certainly not directed at rb's comments which are balanced. Its several people have been implying Liberty has his head up his ass for not jumping to conclusions that Pearson knew all about any illegalities at Philidor when there is no such evidence and other possible scenarios at this point. Again, not directed at rb.

No worries OM, it's Friday night. We should all be entitled to a bit of leeway and a bit of fun. Especially since you and other members on this thread have been invested in this name and haven't had a particularly good week. For that I empathize. A premature opening of the scotch is I think should also be warranted.

[original mungerville]

So question for the experienced investment bankers.... Is it too late to buy Salix with Valeant stock instead of debt?  Asking for a friend of a friend....

 

Looks like S&P just downgraded VRX debt to B+.  Now four notches from investment grade.  Going to be a while before they turn investment grade which seems to be part of Ackman's thesis.

 

Well, I guess it makes the bonds even cheaper to buy back. Game on.

 

No question this is going to be a shit storm for a year or more. Rating agencies, government, securities lawsuits, bad-mouthing by competitors, short-sellers, probably a market downturn as well, etc etc. This is what I said last week, this is going to be a very rocky ride.   

[feynmanresearch]

I can't believe Ackman compared Valeant to Amex's situation in the 60s