VRX - Valeant Pharmaceuticals International Inc.

[ourkid8]

In Canada, we are innocent UNTIL proven guilty.  The special committee is investigating the issue and MP will remain as CEO until that investigation is complete.  We are giving him the benefit of the doubt as he has created a tremendous amount of shareholder values and yes there has been questionable practices but nothing has been deemed clearly illegal YET.  Let's wait for the facts instead of listening to noise. 

 

I don't understand how investors want to give Valeant the benefit of the doubt on this one. It's like Stockholm Syndrome between investors and Pearson. He's raked the shareholders over the coals and he's still got your support.

 

It's weird the power the guy has over other investors. Sequoia would rather lose two directors and face redemptions than admit the thesis had changed and the risk was too high. Just bizarre.

[cmlber]

I don't understand how investors want to give Valeant the benefit of the doubt on this one. It's like Stockholm Syndrome between investors and Pearson. He's raked the shareholders over the coals and he's still got your support.

 

It's weird the power the guy has over other investors. Sequoia would rather lose two directors and face redemptions than admit the thesis had changed and the risk was too high. Just bizarre.

 

I've never been long VRX until a few days ago, so he hasn't raked me over the coals.  And sequoia is up more than 10x aren't they?  So he hasn't raked them over the coals either.  I think this is a huge overreaction to unethical, but not illegal, behavior in a small subsidiary of the business and think he will learn from this and the business will grow in a much more sustainable way going forward from a mid single digit multiple of earnings today.

 

[ourkid8]

It's not a subsidiary of Valeant, Philidor is a 3rd party and should be referred to as that. 

 

I don't understand how investors want to give Valeant the benefit of the doubt on this one. It's like Stockholm Syndrome between investors and Pearson. He's raked the shareholders over the coals and he's still got your support.

 

It's weird the power the guy has over other investors. Sequoia would rather lose two directors and face redemptions than admit the thesis had changed and the risk was too high. Just bizarre.

 

I've never been long VRX until a few days ago, so he hasn't raked me over the coals.  And sequoia is up more than 10x aren't they?  So he hasn't raked them over the coals either.  I think this is a huge overreaction to unethical, but not illegal, behavior in a small subsidiary of the business and think he will learn from this and the business will grow in a much more sustainable way going forward from a mid single digit multiple of earnings today.

[Picasso]

A good investor can read through certain intangibles and make a decision before a court does. And if you don't the market will do it for you.

 

There's been a series of indications that management is misleading. It's also like investors are pretending the issues at Philidor and Marthon aren't impacting the rest of the business. When put together it goes beyond waiting to find out who knew what at Philidor.

 

I also don't think Sequoia is up 10x, maybe 3x. ValueAct might be up 10x.

 

Anyway at the right price it doesn't matter. I'm just surprised by how much investors stand behind a guy driving the company off a cliff.  It's like investors don't know theres a cliff and business is just going on as usual. Like Eric says, now fraud allegations are standard collection disputes.

[ERICOPOLY]

In Canada, we are innocent UNTIL proven guilty.  The special committee is investigating the issue and MP will remain as CEO until that investigation is complete.  We are giving him the benefit of the doubt as he has created a tremendous amount of shareholder values and yes there has been questionable practices but nothing has been deemed clearly illegal YET.  Let's wait for the facts instead of listening to noise. 

 

I don't understand how investors want to give Valeant the benefit of the doubt on this one. It's like Stockholm Syndrome between investors and Pearson. He's raked the shareholders over the coals and he's still got your support.

 

It's weird the power the guy has over other investors. Sequoia would rather lose two directors and face redemptions than admit the thesis had changed and the risk was too high. Just bizarre.

 

Innocent UNTIL proven guilty is important for the legal system.

 

However I think shareholders don't need to put up with lies even if it's legal to do so. 

[lessthaniv]

I also don't think Sequoia is up 10x, maybe 3x. ValueAct might be up 10x.  ......  I'm just surprised by how much investors stand behind a guy driving the company off a cliff. 

 

???

[ourkid8]

Are you 100% certain without a shadow of doubt VRX management is lying? 

 

In Canada, we are innocent UNTIL proven guilty.  The special committee is investigating the issue and MP will remain as CEO until that investigation is complete.  We are giving him the benefit of the doubt as he has created a tremendous amount of shareholder values and yes there has been questionable practices but nothing has been deemed clearly illegal YET.  Let's wait for the facts instead of listening to noise. 

 

I don't understand how investors want to give Valeant the benefit of the doubt on this one. It's like Stockholm Syndrome between investors and Pearson. He's raked the shareholders over the coals and he's still got your support.

 

It's weird the power the guy has over other investors. Sequoia would rather lose two directors and face redemptions than admit the thesis had changed and the risk was too high. Just bizarre.

 

Innocent UNTIL proven guilty is important for the legal system.

 

However I think shareholders don't need to put up with lies even if it's legal to do so.

[cmlber]

A good investor can read through certain intangibles and make a decision before a court does. And if you don't the market will do it for you.

 

There's been a series of indications that management is misleading. It's also like investors are pretending the issues at Philidor and Marthon aren't impacting the rest of the business. When put together it goes beyond waiting to find out who knew what at Philidor.

 

I also don't think Sequoia is up 10x, maybe 3x. ValueAct might be up 10x.

 

Anyway at the right price it doesn't matter. I'm just surprised by how much investors stand behind a guy driving the company off a cliff.  It's like investors don't know theres a cliff and business is just going on as usual. Like Eric says, now fraud allegations are standard collection disputes.

 

Without using the stock price to support the argument, can you point to anything in the fundamentals from 2012 to now that supports that point that Pearson is driving the business off a cliff?  You are just being biased by the stock price decline.

[ERICOPOLY]

But no authorities (except maybe California? I thought I read they weren't even sure if it was legal to backdoor into CA)? It seems there is clear proof for using different IDs, not having certain licenses, etc. so why hasn't any legal authority commented? It's weird.

Authorities move a little slower than the internet.

 

Or they did nothing illegal.  That's still equally likely in my opinion.

 

And those findings were uncovered by what investigation?

[Picasso]

I shouldn't have to list out the mistakes. If you've followed the stock long enough you would know.

 

Partnering up with Ackman to buy Allergan. That rubbed a lot of people the wrong way, including judges where you don't want to make enemies.

 

Constantly shifting disclosures based on what looks financially appealing.

 

Stating they want to be a top 5 pharma by market cap by 2016.

 

Placing the Allergan gains into operating earnings instead of investment income.

 

Putting non weighted CAGR's in slide decks to show better growth numbers.

 

Improperly answering short allegations in recent 8-K's

 

Not responding to senator requests for information

 

Allowing Philidor to operate in an aggressive manner

 

Setting up VIE's to limit exposure to those captive pharmacies

 

Calling those pharmacies specialty pharmacies when they aren't

 

Acting dumb about Philidor disputes until being dropped by PBM's

 

Buying tail assets under heavy scrutiny from Congress such as Marathon to show higher short term cash flow growth

 

etc etc

 

I'd call all that behavior detroying what they initially had success at.

[rishig]

There are too many cockroaches here.

• Their business model is unsustainable. Acquisition era has effectively ended. Without acquisitions and R&D, a pharma company is like a depleting mine whose assets deplete away. As drugs go generic, profits collapse.
  
• Valeant may switch to doing more R&D, but they are way out of their league here.
  
• Disclosures on how drugs have been doing under Valeant's roof are very weak. They do not break out performance of their drugs, and my suspicion is that the longer a drug has been under Valeant's roof, the weaker is the performance - given how much they are trying to milk the assets by cutting R&D and SG&A. Valeant is only company I have seen where they don't track YOY performance of their largest drugs. They keep changing around segment reporting, and I am surprised how all the "famous" investors have been overlooking the horrible financial disclosures in their 10-Ks. This is my biggest complaint.
  
• There is too much scope for financial shenanigans. Every quarter Valeant reports two numbers, the GAAP number and non-GAAP Cash EPS number. The two numbers are so off - Valeant says that look all these one-time expenses can be ignored. Long investors think that once the acquisition train stops all the one-time expenses of restructuring will go away. I am a skeptical investor - there is too much room in current reported number to play games. They could be dumping operating expenses into one-time expenses. I don't believe any of this non GAAP bullshit, given that management has been aggressive in so many of the qualitative issues that have come out recently.
  
• Growth in prices or unit volume of organic drugs will slow down now that both levers are difficult to pull. Price hikes mean attention from regulators. Without the specialty pharmacy channel, unit volume growth will slow down, given their drugs will be replaced by the generic version more often when dispensed through a regular pharmacy.
  
• Mike Pearson is no "value" investor. Value investing is buying assets on the cheap, often when there is a motivated seller on the other end causing a mispricing. All the assets that Valeant acquired are in a private negotiated transaction. Sellers in private negotiated transactions don't give up their assets for anything less than what is intrinsically its true worth to them. Take Salix as an example. They paid $15B for a revenue stream of $1.1B and, at Valeant's cost structure, $600M in EBITDA. How is that cheap? Mr. Pearson is just an (over) confident private equity guy who assumed paying up is fine because he could lever up cheaply with variable rate financing and then cut out expenses. This is standard private equity game that often gets companies in trouble and does not build any long-term shareholder value.
  
• Finally, the most important one - current valuation gives no margin of safety for the risks one is taking. Debt / EBITDA is over 6.5x. With debt of over $30 billion and EBITDA of less than $4.5 billion, it will take them next 3-4 years to come to Debt / EBITDA of 3x. Lots of things can go wrong along the way. Regulators going after them, fines, change in business model, failure in execution, and other cockroaches running around. If Valeant bought its assets for $40 billion, my argument is that they overpaid in many of these cases. Even if that is a fair value to pay, $40 billion of assets - $30 billion of debt gives us $10 billion in market cap. That is 1/3rd current value. These assets are worth current market cap ONLY if Valeant can play all the games - raise prices, grow organically, cut costs - all of which in my opinion are not sustainable.

 

In the short-run anything can happen. But I am not interested in owning this private-equity like company, no matter which famous investor owns it at current valuation. If valuation comes down to where it is trading at "liquidation" value of $10B in market cap, I'll take a look again. Until then, no, thank you. I got out at ~$100. I took a small loss on my small little position.

[Picasso]

And I forgot the most important part. Destroying their reputation in both the business and capital markets.  Because getting your debt downgraded further into junk territory and doubling your cost of capital is not a good look for a roll up. I can't imagine too many businesses willing to sell themselves to Valeant in the near future if the strategy remains the same.

 

And how about how they full tapped out their financial resources so they can't repurchase more than a token 200k shares? 

 

The market price drop isn't based on a series of good decisions. Maybe that was the case from 2009-2013. It's been getting ridiculous lately.

[krazeenyc]

I shouldn't have to list out the mistakes. If you've followed the stock long enough you would know.

 

Partnering up with Ackman to buy Allergan. That rubbed a lot of people the wrong way, including judges where you don't want to make enemies.

 

Constantly shifting disclosures based on what looks financially appealing.

 

Stating they want to be a top 5 pharma by market cap by 2016.

 

Placing the Allergan gains into operating earnings instead of investment income.

 

Putting non weighted CAGR's in slide decks to show better growth numbers.

 

Improperly answering short allegations in recent 8-K's

 

Not responding to senator requests for information

 

Allowing Philidor to operate in an aggressive manner

 

Setting up VIE's to limit exposure to those captive pharmacies

 

Calling those pharmacies specialty pharmacies when they aren't

 

Acting dumb about Philidor disputes until being dropped by PBM's

 

Buying tail assets under heavy scrutiny from Congress such as Marathon to show higher short term cash flow growth

 

etc etc

 

I'd call all that behavior detroying what they initially had success at.

 

This is only a guess... but my guess is there wasn't a sudden "AHA" moment brought them to the dark side. I would bet the same type of shrewd (albeit unethical) actions helped VRX to grow as fast as it has. It's just that when you get as large as they've become the scrutiny is greater.

[wisdom]

I am more likely to agree/trust Munger than most posters here. His only issue is on the following moral grounds -

1) raising prices on medcines, etc

2) no R&D

 

I believe most posters are busy identifying false patterns to fit their narratives.

[wisdom]

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

 

 

[ourkid8]

In regards to #1, he was referring to aggressively raising prices which we have seen on 2 drugs in VRX's portfolio yet that model will be avoided ongoing.  He also mentioned this is not like Enron which is key since we should see the stock slowly creep back up to $150 since that was the price in which the lies were spread by Andrew left.   

 

I am more likely to agree/trust Munger than most posters here. His only issue is on the following moral grounds -

1) raising prices on medcines, etc

2) no R&D

 

I believe most posters are busy identifying false patterns to fit their narratives.

[shalab]

I got out of my small position as well - taking a small loss. Overall, I see chances for more headline news coming up. If the hedgies start selling, this could go lower.

 

I was modeling this around $150/share and now it is around $100 - $120, so don't see much margin of safety at the current price. Without debt, obviously, this would have been worth a lot more but the debt erodes the margin of safety significantly.

 

cheers!

There are too many cockroaches here.

• Their business model is unsustainable. Acquisition era has effectively ended. Without acquisitions and R&D, a pharma company is like a depleting mine whose assets deplete away. As drugs go generic, profits collapse.
  
• Valeant may switch to doing more R&D, but they are way out of their league here.
  
• Disclosures on how drugs have been doing under Valeant's roof are very weak. They do not break out performance of their drugs, and my suspicion is that the longer a drug has been under Valeant's roof, the weaker is the performance - given how much they are trying to milk the assets by cutting R&D and SG&A. Valeant is only company I have seen where they don't track YOY performance of their largest drugs. They keep changing around segment reporting, and I am surprised how all the "famous" investors have been overlooking the horrible financial disclosures in their 10-Ks. This is my biggest complaint.
  
• There is too much scope for financial shenanigans. Every quarter Valeant reports two numbers, the GAAP number and non-GAAP Cash EPS number. The two numbers are so off - Valeant says that look all these one-time expenses can be ignored. Long investors think that once the acquisition train stops all the one-time expenses of restructuring will go away. I am a skeptical investor - there is too much room in current reported number to play games. They could be dumping operating expenses into one-time expenses. I don't believe any of this non GAAP bullshit, given that management has been aggressive in so many of the qualitative issues that have come out recently.
  
• Growth in prices or unit volume of organic drugs will slow down now that both levers are difficult to pull. Price hikes mean attention from regulators. Without the specialty pharmacy channel, unit volume growth will slow down, given their drugs will be replaced by the generic version more often when dispensed through a regular pharmacy.
  
• Mike Pearson is no "value" investor. Value investing is buying assets on the cheap, often when there is a motivated seller on the other end causing a mispricing. All the assets that Valeant acquired are in a private negotiated transaction. Sellers in private negotiated transactions don't give up their assets for anything less than what is intrinsically its true worth to them. Take Salix as an example. They paid $15B for a revenue stream of $1.1B and, at Valeant's cost structure, $600M in EBITDA. How is that cheap? Mr. Pearson is just an (over) confident private equity guy who assumed paying up is fine because he could lever up cheaply with variable rate financing and then cut out expenses. This is standard private equity game that often gets companies in trouble and does not build any long-term shareholder value.
  
• Finally, the most important one - current valuation gives no margin of safety for the risks one is taking. Debt / EBITDA is over 6.5x. With debt of over $30 billion and EBITDA of less than $4.5 billion, it will take them next 3-4 years to come to Debt / EBITDA of 3x. Lots of things can go wrong along the way. Regulators going after them, fines, change in business model, failure in execution, and other cockroaches running around. If Valeant bought its assets for $40 billion, my argument is that they overpaid in many of these cases. Even if that is a fair value to pay, $40 billion of assets - $30 billion of debt gives us $10 billion in market cap. That is 1/3rd current value. These assets are worth current market cap ONLY if Valeant can play all the games - raise prices, grow organically, cut costs - all of which in my opinion are not sustainable.

 

In the short-run anything can happen. But I am not interested in owning this private-equity like company, no matter which famous investor owns it at current valuation. If valuation comes down to where it is trading at "liquidation" value of $10B in market cap, I'll take a look again. Until then, no, thank you. I got out at ~$100. I took a small loss on my small little position.

[ZenaidaMacroura]

Just a brief thought on vrx providing more granularity on the performance of their portfolio...

 

If you are a "traditional" pharmaceutical company (one that is "heavy" on R&D) you WANT to break out the sales/ performance numbers for each product because it vindicates the substantial investments you've made (a lot of research leads nowhere).

 

If you rely on generics it's not as apparent.  Do you want your competitors to have pertinent information wrt the niche you occupy (of course investors want it broken out for their own reason). Some of these generic products may even perform like a patented portfolio because the product flies under the radar/isn't a sufficiently large opportunity to warrant competition (marketing/manufacturing/etc) -unless you highlight the opportunity period over period with precise performance figures...

[arcube]

There are too many cockroaches here.

• Their business model is unsustainable. Acquisition era has effectively ended. Without acquisitions and R&D, a pharma company is like a depleting mine whose assets deplete away. As drugs go generic, profits collapse.
  
• Valeant may switch to doing more R&D, but they are way out of their league here.
  
• Disclosures on how drugs have been doing under Valeant's roof are very weak. They do not break out performance of their drugs, and my suspicion is that the longer a drug has been under Valeant's roof, the weaker is the performance - given how much they are trying to milk the assets by cutting R&D and SG&A. Valeant is only company I have seen where they don't track YOY performance of their largest drugs. They keep changing around segment reporting, and I am surprised how all the "famous" investors have been overlooking the horrible financial disclosures in their 10-Ks. This is my biggest complaint.
  
• There is too much scope for financial shenanigans. Every quarter Valeant reports two numbers, the GAAP number and non-GAAP Cash EPS number. The two numbers are so off - Valeant says that look all these one-time expenses can be ignored. Long investors think that once the acquisition train stops all the one-time expenses of restructuring will go away. I am a skeptical investor - there is too much room in current reported number to play games. They could be dumping operating expenses into one-time expenses. I don't believe any of this non GAAP bullshit, given that management has been aggressive in so many of the qualitative issues that have come out recently.
  
• Growth in prices or unit volume of organic drugs will slow down now that both levers are difficult to pull. Price hikes mean attention from regulators. Without the specialty pharmacy channel, unit volume growth will slow down, given their drugs will be replaced by the generic version more often when dispensed through a regular pharmacy.
  
• Mike Pearson is no "value" investor. Value investing is buying assets on the cheap, often when there is a motivated seller on the other end causing a mispricing. All the assets that Valeant acquired are in a private negotiated transaction. Sellers in private negotiated transactions don't give up their assets for anything less than what is intrinsically its true worth to them. Take Salix as an example. They paid $15B for a revenue stream of $1.1B and, at Valeant's cost structure, $600M in EBITDA. How is that cheap? Mr. Pearson is just an (over) confident private equity guy who assumed paying up is fine because he could lever up cheaply with variable rate financing and then cut out expenses. This is standard private equity game that often gets companies in trouble and does not build any long-term shareholder value.
  
• Finally, the most important one - current valuation gives no margin of safety for the risks one is taking. Debt / EBITDA is over 6.5x. With debt of over $30 billion and EBITDA of less than $4.5 billion, it will take them next 3-4 years to come to Debt / EBITDA of 3x. Lots of things can go wrong along the way. Regulators going after them, fines, change in business model, failure in execution, and other cockroaches running around. If Valeant bought its assets for $40 billion, my argument is that they overpaid in many of these cases. Even if that is a fair value to pay, $40 billion of assets - $30 billion of debt gives us $10 billion in market cap. That is 1/3rd current value. These assets are worth current market cap ONLY if Valeant can play all the games - raise prices, grow organically, cut costs - all of which in my opinion are not sustainable.

 

In the short-run anything can happen. But I am not interested in owning this private-equity like company, no matter which famous investor owns it at current valuation. If valuation comes down to where it is trading at "liquidation" value of $10B in market cap, I'll take a look again. Until then, no, thank you. I got out at ~$100. I took a small loss on my small little position.

 

Thank you for explaining to some posters here why MP is no wonder kid and how this is not so great an investment. I appreciate your time on this.

[scorpioncapital]

n the short-run anything can happen. But I am not interested in owning this private-equity like company, no matter which famous investor owns it at current valuation. If valuation comes down to where it is trading at "liquidation" value of $10B in market cap, I'll take a look again. Until then, no, thank you. I got out at ~$100. I took a small loss on my small little position.

 

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

 

Now I sold some $45 puts for December at $1.2, this seems like it "might" be successful but all the scenarios are basically bankruptcy bets. If that won't happen, then a very low price is out of the question and a very high price is also out of the question due to the pressure on future cash flows.

[rishig]

Just a brief thought on vrx providing more granularity on the performance of their portfolio...

 

If you are a "traditional" pharmaceutical company (one that is "heavy" on R&D) you WANT to break out the sales/ performance numbers for each product because it vindicates the substantial investments you've made (a lot of research leads nowhere).

 

If you rely on generics it's not as apparent.  Do you want your competitors to have pertinent information wrt the niche you occupy (of course investors want it broken out for their own reason). Some of these generic products may even perform like a patented portfolio because the product flies under the radar/isn't a sufficiently large opportunity to warrant competition (marketing/manufacturing/etc) -unless you highlight the opportunity period over period with precise performance figures...

 

Come on! All the data is already reported to IMS for most drugs. But not for Valeant's because of their "specialty" pharmacy distribution. This is no reason to keep this a secret.

[arcube]

I shouldn't have to list out the mistakes. If you've followed the stock long enough you would know.

 

Partnering up with Ackman to buy Allergan. That rubbed a lot of people the wrong way, including judges where you don't want to make enemies.

 

Constantly shifting disclosures based on what looks financially appealing.

 

Stating they want to be a top 5 pharma by market cap by 2016.

 

Placing the Allergan gains into operating earnings instead of investment income.

 

Putting non weighted CAGR's in slide decks to show better growth numbers.

 

Improperly answering short allegations in recent 8-K's

 

Not responding to senator requests for information

 

Allowing Philidor to operate in an aggressive manner

 

Setting up VIE's to limit exposure to those captive pharmacies

 

Calling those pharmacies specialty pharmacies when they aren't

 

Acting dumb about Philidor disputes until being dropped by PBM's

 

Buying tail assets under heavy scrutiny from Congress such as Marathon to show higher short term cash flow growth

 

etc etc

 

I'd call all that behavior detroying what they initially had success at.

 

Thank you for this. Some people on this board want a picture and a video tape of MP doing some crazy @#$% to believe that something is wrong with this company or unless it is proven by the committee that they set up internally that there was wrongdoing. All the technicalities shouldn't matter when we are seeing such behavior by the management team. If they want to put this behind them, like Erikpoly said, they need to come up with all the @#$% and then start cleaning.

 

Much appreciated for your thoughts.

 

[rishig]

n the short-run anything can happen. But I am not interested in owning this private-equity like company, no matter which famous investor owns it at current valuation. If valuation comes down to where it is trading at "liquidation" value of $10B in market cap, I'll take a look again. Until then, no, thank you. I got out at ~$100. I took a small loss on my small little position.

 

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

 

Now I sold some $45 puts for December at $1.2, this seems like it "might" be successful but all the scenarios are basically bankruptcy bets. If that won't happen, then a very low price is out of the question and a very high price is also out of the question due to the pressure on future cash flows.

 

We'll see when we get there. I may not do anything at that time as well. It's irrelevant to talk about something that hasn't happened yet. Today, I am a seller (and I sold) for reasons stated before.

[ourkid8]

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

 

There are too many cockroaches here.

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

[rishig]

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

There are too many cockroaches here.

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

 

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

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

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

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