VRX - Valeant Pharmaceuticals International Inc.

[Picasso]

rishig,

 

To maybe expand a bit on why an asset may be worth 1.3x under Valeant versus standalone....

 

I think it's for the same reason that stocks like IRM become immediately more valuable after converting to a REIT, all else being equal.  Distributable or reinvestable earnings of pre-Valeant acquisitions are by their nature significantly less than under the Valeant platform.  Ugh, I tried not to use the word "platform" because I think they're a dirty word in finance these days, but anyway....  So now you gut the SG&A, lever it up, and drop the tax rate.  Voila, suddenly there's all this extra earnings power which is given to the bondholders in the form of interest and stockholders in the form of free cash flow.  $1 of an asset pre-Valeant should not be worth less than $1 of earnings post-Valeant unless they make an absolutely terrible business decision or acquisition that may become exacerbated by the leverage.  So it makes sense why the market will value these acquisitions at 1.2x, 1.3x, etc.  Otherwise you'll end up with a stock at some price generating ridiculous free cash flow from that mix of cost cuts, leverage, and tax advantages.  Will the market value it at 5x free cash flow?  Probably not.  It's going to price like REIT's will except all the cash flow is reinvested at high rates of return.

 

However.....

 

Can Valeant sell off these assets for say 2x what they paid for it after they gutted it and took the tax advantage?  No... That's kind of the rub.  It's worth more to Valeant shareholders because they generate a ton of cash under Valeant.  They won't generate that kind of cash for someone else. 

 

That's really the dilemna.  The assets are really only as valuable as the cost and tax structure they sit under.  On their own they won't be that valuable but under "VRX" they produce a ton of free cash.  And how do you want to value VRX?  On free cash.  So you're naturally going to pay a multiple of the acquisition cost.

 

Ackman is made fun of for the whole "platform value" thing, but it's true for the right kinds of industries.  I think we're all just having trouble understanding why it works for pharma versus beer, ketchup, burgers, etc.  I haven't taken another look at KHC or QSR lately, but I bet you'll find similar multiples of acquisition cost vs. the enterprise value of the business.

[LC]

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

 

Definitely turning into a soap opera.

 

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

 

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

 

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

 

I'm in the same place: I threw it in the too hard pile when they were "revolutionizing" pharma by slashing useless R&D from companies they purchased. Screw the other investors involved. On one hand, Valueact etc. are involved. On the other, Munger is holding his nose. So that's a wash.

 

What's more likely, a "revolutionary" idea  (that none of the other really smart people in an industry filled with really smart people have ever though of), or perhaps they are just buying near-death assets, slashing every expense possible, and shilling as much of the product though a really sketchy, captive sales network?

 

Part of Valeant remined me of that company Iconix Brands. They buy really crappy fashion brands (i.e. "old news" - think Joe Boxer, Ecko, London Fog, etc.) and push the product through crappy retail chains.

 

Except Iconix trades at 6x earnings and Valeant trades at 52x earnings.

[Picasso]

That's probably a mischaracterization of the situation at Valeant.  Just because it trades for 52x EPS doesn't mean it's expensive.  By that notion you're giving no credit to the free cash flow.  It's a question of how that FCF will look over time if the business stops making acquisitions.  And how much of the amortization is a real expense.

 

There are also other pharma taking the Valeant approach (hardly revolutionary unless we take a time machine back to 2010), not all the assets are near death, and they're not sending the majority of product through the captive pharmacies.  So that's kind of extending the problems of a small part of the portfolio to the rest of the assets.

 

But this probably does fit in the too hard pile for most.  However, the conclusions you draw are the ones that most investors assume having never really done work into the business. 

[rishig]

rishig,

 

To maybe expand a bit on why an asset may be worth 1.3x under Valeant versus standalone....

 

I think it's for the same reason that stocks like IRM become immediately more valuable after converting to a REIT, all else being equal.  Distributable or reinvestable earnings of pre-Valeant acquisitions are by their nature significantly less than under the Valeant platform.  Ugh, I tried not to use the word "platform" because I think they're a dirty word in finance these days, but anyway....  So now you gut the SG&A, lever it up, and drop the tax rate.  Voila, suddenly there's all this extra earnings power which is given to the bondholders in the form of interest and stockholders in the form of free cash flow.  $1 of an asset pre-Valeant should not be worth less than $1 of earnings post-Valeant unless they make an absolutely terrible business decision or acquisition that may become exacerbated by the leverage.  So it makes sense why the market will value these acquisitions at 1.2x, 1.3x, etc.  Otherwise you'll end up with a stock at some price generating ridiculous free cash flow from that mix of cost cuts, leverage, and tax advantages.  Will the market value it at 5x free cash flow?  Probably not.  It's going to price like REIT's will except all the cash flow is reinvested at high rates of return.

 

However.....

 

Can Valeant sell off these assets for say 2x what they paid for it after they gutted it and took the tax advantage?  No... That's kind of the rub.  It's worth more to Valeant shareholders because they generate a ton of cash under Valeant.  They won't generate that kind of cash for someone else. 

 

That's really the dilemna.  The assets are really only as valuable as the cost and tax structure they sit under.  On their own they won't be that valuable but under "VRX" they produce a ton of free cash.  And how do you want to value VRX?  On free cash.  So you're naturally going to pay a multiple of the acquisition cost.

 

Ackman is made fun of for the whole "platform value" thing, but it's true for the right kinds of industries.  I think we're all just having trouble understanding why it works for pharma versus beer, ketchup, burgers, etc.  I haven't taken another look at KHC or QSR lately, but I bet you'll find similar multiples of acquisition cost vs. the enterprise value of the business.

 

Thanks for the reply.

 

I have enough information to put this in my "too hard" pile.

 

Good luck. I hope you are right.

[LC]

That's probably a mischaracterization of the situation at Valeant.  Just because it trades for 52x EPS doesn't mean it's expensive.  By that notion you're giving no credit to the free cash flow.  It's a question of how that FCF will look over time if the business stops making acquisitions.  And how much of the amortization is a real expense.

 

Iconix also spent a massive amount on acquisitions when amassing their portfolio, a large part funded with debt. They also tout non-GAAP numbers (but I guess everyone does these days).

 

With Valeant, I have no idea what their sales distribution really looks like. I make an assumption: the sales channels span the gamut, from sketchy captive pharmacies playing really close to the line, to ultra-transparent purchases from highly regulated customers.

 

I'm not trying to extend this to the entire portfolio, but does anyone know what % of sales are "close to the line" vs. arms-length? I don't, and I'm not sure I trust management to guide me.

 

I mean, wasn't the pitch pre-salix to slash R&D and sales, and just shove these specialty drugs into their sales platform? And boom, magic happens? That's what it sounded like (to be overly blunt). Then they caught flak for that, and so the story gradually changes. No more slashing of the sales team (salix), no more price-gouging, etc.

 

In my humble, uninformed, probably-too-conservative-for-this-market opinion...These guys are deal makers out to make a buck. They're not doing it by improving the industry or providing novel solutions to problems, or by raising the standard for everyone else.

 

I doubt there's a real moat here, but they are good at squeezing dollars from assets (some assets sketchier than others) in a multitude of methods (some methods sketchier than others). Pearson is an ex-McKinsey guy. He knows how to squeeze and how to game the system to make money. That's my 2 cents.

[ourkid8]

Incorrect in regards to the Salix sales team:

 

http://www.fiercepharmamarketing.com/story/valeant-keep-specialty-salix-reps-its-eyeing-primary-care-potential-cuts/2015-02-24

 

"We believe Salix's sales force is, by far, the strongest in the GI space and it has been a key part of their success," he said, noting later that "we believe these customer-facing roles have played and will play a huge role in the success of the company." - MP

 

As Valeant is a leader in the GI space, they will continue to leverage the Salix sales team to push additional GI products (for next to no incremental cost besides the acquisition) HOWEVER this only works with the acquisition model they were on.

 

I mean, wasn't the pitch pre-salix to slash R&D and sales, and just shove these specialty drugs into their sales platform? And boom, magic happens? That's what it sounded like (to be overly blunt). Then they caught flak for that, and so the story gradually changes. No more slashing of the sales team (salix), no more price-gouging, etc.

[LC]

Salix's sales team is/was ranked the best in the GI space, I agree.

 

That doesn't mean you can't fire them. Or half of them.

 

Knowing he was going to keep them on, I didn't expect MP to say anything differently.

 

Although, this was funny:

 

As company spokeswoman Laurie Little told FiercePharmaMarketing by email, Salix right now has about 150 primary care sales reps on staff--a number it was planning to increase to about 230 or more. The tally Valeant ends up with "could be lower, higher, or just the way it is," she wrote. "We will be evaluating the group through the integration process."

 

Lower, higher, or just the way it is! That's what I tell people who ask where Alibaba's stock price is headed.

[ourkid8]

As MP and you said, if they are ranked best in the GI space he would not the strong ones go knowing the strength of Salix products/ pipeline.  Once all these shenanigans are behind the company and the witch hunt is complete; I would love to see numerous tuck in acquisitions in this space along with at B&L.  Both strong companies and will continue to allow VRX to grow for many many years in the future.

 

MP is in a sink/swim position right now, its time to prove to the market the quality of M&A deals VRX made and what kind of leader he is.  If he can show very strong earnings without Philidor, the stock is cheap and we will be rewarded. 

 

Salix's sales team is/was ranked the best in the GI space, I agree.

 

That doesn't mean you can't fire them. Or half of them.

 

Knowing he was going to keep them on, I didn't expect MP to say anything differently.

[LC]

I agree MP's deals need to prove their consistency. It's like a loan portfolio. Are they seasoned? Haha. I wish more data was released regarding this.

 

Also the recent media scrutiny only puts a magnifying glass on the situation and adds to the pressure to meet numbers.

[Guest Schwab711]

As MP and you said, if they are ranked best in the GI space he would not the strong ones go knowing the strength of Salix products/ pipeline.  Once all these shenanigans are behind the company and the witch hunt is complete; I would love to see numerous tuck in acquisitions in this space along with at B&L.  Both strong companies and will continue to allow VRX to grow for many many years in the future.

 

MP is in a sink/swim position right now, its time to prove to the market the quality of M&A deals VRX made and what kind of leader he is.  If he can show very strong earnings without Philidor, the stock is cheap and we will be rewarded. 

 

Salix's sales team is/was ranked the best in the GI space, I agree.

 

That doesn't mean you can't fire them. Or half of them.

 

Knowing he was going to keep them on, I didn't expect MP to say anything differently.

 

20% of the intangibles associated with SLXP's pipeline were written off in 3Q15. SLXP's pipeline is not progressing very well. I think my SLXP estimates are similar or a little higher than the JPM doc. I just don't see the pipeline as having much value because of recent updates.

[Picasso]

LC

 

Regarding the underlying earnings power, Rasputin listed a fairly conservative estimate of what that looks like.  It's probably buried several pages back.  How that will look in 5, 10, 20 years is debatable.  My estimates weren't too far off from his numbers.

 

Pearson is out to make a buck, but the buck is for the shareholders.  It's not like he's been dumping shares into the market every quarter like other deal makers I follow.  If he's trying to make a buck for himself he's doing it in a very stupid way.  He should stop taking a $1 salary and restructure his agreement to sell off a portion of his shares.  The problem, which someone alluded to before, is the reputation of Valeant that has been tarnished as a result of chasing down those dollars and trying to meet guidance. 

 

There's that saying where the path to hell is paved with good intentions (or something like that).  I think Pearson had a perspective on how to create maximum value for shareholders and it got a little out of hand.  I doubt anyone here understands the pressure he has been under for the past several years.  That pressure can force some really dumb decisions.

 

I'm going to take a break from this thread as well.  I know about 90% of what I'd like to understand about the business in the off chance that the situation becomes dire and it starts trading at a fraction of the future free cash flows.  Until then, there are better places to spend my time.

 

Good luck to everyone on this one.

[ourkid8]

Do you have the JPM doc?  Right now capital markets is closed for VRX so they will invest in R&D where it makes sense with the highest risk/reward.  I am really excited about the prospects behind Xifaxan which potentially is a home run...

 

As MP and you said, if they are ranked best in the GI space he would not the strong ones go knowing the strength of Salix products/ pipeline.  Once all these shenanigans are behind the company and the witch hunt is complete; I would love to see numerous tuck in acquisitions in this space along with at B&L.  Both strong companies and will continue to allow VRX to grow for many many years in the future.

 

MP is in a sink/swim position right now, its time to prove to the market the quality of M&A deals VRX made and what kind of leader he is.  If he can show very strong earnings without Philidor, the stock is cheap and we will be rewarded. 

 

Salix's sales team is/was ranked the best in the GI space, I agree.

 

That doesn't mean you can't fire them. Or half of them.

 

Knowing he was going to keep them on, I didn't expect MP to say anything differently.

 

20% of the intangibles associated with SLXP's pipeline were written off in 3Q15. SLXP's pipeline is not progressing very well. I think my SLXP estimates are similar or a little higher than the JPM doc. I just don't see the pipeline as having much value because of recent updates.

[rpadebet]

Picasso,

Thanks for your contributions to the thread. I wish I could stay away too, but I am invested, so it's efficient  to piggy back on this thread to follow the news.

 

Anyway, I think people deciding it belongs to too hard pile are right...if many more had decided this way earlier, this wouldn't have become the hedge fund motel it became. I guess the volatility is mostly because of weak conviction buyers puking their shares before year end.

 

I'm comfortable with this at this price. I can wait for the storm to pass. I like the assets by themselves at this price. I plan to buy more around 70-80 if the fraud argument appears as weak as it appears now.

[fareastwarriors]

http://www.wsj.com/articles/activist-investor-bill-ackman-plays-defense-1446689963

 

Activist Investor Bill Ackman Plays Defense

[Guest glavacem]

I agree with you on Xifaxan. I know little about valeant...I do know about small intestinal bacterial overgrowth(sibo). For people with sibo the only drug ever discussed is Xifaxan. It is also said that up to 84% of people with IBS actually have sibo, so the potential for this drug is huge. Sibo is relatively unknown by most everyone, but the word is starting to spread, especially with those who have bowel issues.

 

 

 

Do you have the JPM doc?  Right now capital markets is closed for VRX so they will invest in R&D where it makes sense with the highest risk/reward.  I am really excited about the prospects behind Xifaxan which potentially is a home run...

 

As MP and you said, if they are ranked best in the GI space he would not the strong ones go knowing the strength of Salix products/ pipeline.  Once all these shenanigans are behind the company and the witch hunt is complete; I would love to see numerous tuck in acquisitions in this space along with at B&L.  Both strong companies and will continue to allow VRX to grow for many many years in the future.

 

MP is in a sink/swim position right now, its time to prove to the market the quality of M&A deals VRX made and what kind of leader he is.  If he can show very strong earnings without Philidor, the stock is cheap and we will be rewarded. 

 

Salix's sales team is/was ranked the best in the GI space, I agree.

 

That doesn't mean you can't fire them. Or half of them.

 

Knowing he was going to keep them on, I didn't expect MP to say anything differently.

 

20% of the intangibles associated with SLXP's pipeline were written off in 3Q15. SLXP's pipeline is not progressing very well. I think my SLXP estimates are similar or a little higher than the JPM doc. I just don't see the pipeline as having much value because of recent updates.

[original mungerville]

Not sure if someone has posted this: Interviews with Ackman re Valeant.

 

http://www.wsj.com/articles/activist-investor-bill-ackman-plays-defense-1446689963

 

At one point, Ackman said Pearson might have to go. (Not unlike this board.)

[rpadebet]

I would rather Ackman goes for now.

Publicity isn't good for VRX business model ( cutting r&d, raising prices, low tax rate, high debt load) and all Ackman has done is bring the cameras with him.

[CanadianMunger]

I would rather Ackman goes for now.

Publicity isn't good for VRX business model ( cutting r&d, raising prices, low tax rate, high debt load)

 

Publicity isn't good for their business model?  Perhaps because of the unquestionable immorality?

 

-CM

[original mungerville]

If you buy the stock you are assuming no earnings impairment which could lower the value of the business below the debt + equity value at the current price. That's like $62 billion, or it was before the stock started falling in price again.

 

But the bonds are trading at 80% of face value and earn 6% of face value a year. You're only going to lose owning those bonds if the equity is fully wiped out and the sum total of everything Valeant acquired is worth half of what they purchased it for. At least if we're looking out a few years to collect a few coupons. That's a pretty bad situation that no equity holder is thinking will happen.

 

I think the bonds are just mispriced rather than saying the equity is worthless.  If or when the cost of capital goes down for Valeant then that gap will change. But a large discount to face for Valeant bonds is strange because they have a ton of cash earnings coverage in the short term which is more important to the bond holders than equity holders. Amortization may be a cost for equity holders in the long term, but to the bond holders thats real cash to cover interest and principal. Also Valeant doesn't pay a lot of capex or taxes so the debt burden isn't as high as people think.

 

But regardless of which market is right (bonds or stock) that is a really large gap to fill. The bonds are getting close to a price where it's nearly impossible to lose over then years. Not really the case for the equity. Does that make sense?

 

tldr; bondholders dont like the risk of Valeant here, equity holders still think theres a ton of excess earnings

 

Picasso,

I get your point, however i think you are viewing this short term. Yes there is going to be lot of scrutiny and media/regulator attention for few months. It may even impact revenues, earnings in the next year or two. This is a news cycle which will pass once they find something else to focus their attention on.

 

Look past all this smoke and confusion that exists now. There are real assets here. They paid 40b for it. They made some improvements. They have their tax rate as an asset. Their products are small individually and diversified. Current management doesn't have to run it, these assets will have value in somebody else's hands too.

 

Few month ago, investors here were saying how 40b invested by VRX is suddenly worth 3x that amount, because of all these assets/capabilities VRX possessed. Now the market is saying it is worth only 1.5x of what they paid. To me 1.2-1.5x makes more sense in a decently efficient market.

 

In 2-3 of years as you noted their cashflow will enable them to pay off 20%-30% of current debt. Equity portion of firm value is going to go up by similar amount.

 

I am not predicting the price won't go down even more, but I think it is decent value here with lots of free optionality.

 

I hate to harp on this topic but I have yet to see a sufficient explanation for why it is reasonable to assume a low (single-digit) tax rate in perpetuity. Can someone explain how it will work since I guess I'm not understanding the assumption. I assume investors should only care about the long-term cash tax rate and not the book rate (which may be wrong?).

 

On p.9 of this thread (link below), the board came to the conclusion (which I agree with) that VRX's tax rate is only sustainable if they continue to purchase foreign assets or if they can transfer US-based IP to Barbados. As a side note, VRX is currently being investigated by the IRS and Canadian tax authority for potentially manipulating their IP transfers in the past (attributing large intangible asset balances to a company's "brand name" instead of cash flow producing assets, even in cases where VRX plans to discontinue the use of that brand). Some fine (and possibly a restatement) seems likely considering VRX's actual results.

 

In theory, VRX's tax structure shouldn't be possible since VRX should be paying FV at the time of IP transfer, as calculated by the tax savings as a result of the domicile transfer. The only difference between VRX and everyone else (GOOG, AAPL, MSFT, PFE, GSK, ect) is the use of Barbados instead of Ireland and the difference is negligible. Yet somehow, VRX expects a ~5% tax rate when others mentioned realize a 15-25% tax rate. I think this guidance (~5%) is accurate for book taxes due to the large non-deductible amortization expense, but the cash tax rate seems destined to be materially higher. We know for sure that SLXP's IP is still in the US so all future SLXP cash flows will be taxed at US corporate rates + costs of DTL repayment on these cash flows. I get the debt shield, but the majority of intangible asset amortization is non-deductible which should result in a wash (means book taxes will generally be much lower than cash taxes). VRX's cash taxes are already significantly higher than book taxes even though SLXP has been unprofitable thus far (inventory).

 

Assuming a 20-30% cash tax rate will materially change future FCF estimates. Am I wrong to think about the tax structure in this way?

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/80/

 

Tax rate in Barbados is 1% (with a Canadian-Barbados tax treaty so no Canadian taxes are payable) whereas Ireland is 12.5%. So there is 11.5% of your difference. If others have a 15% tax rate, you only need to figure out how they are squeezing another 3.5% out - probably loading debt onto US operations.

 

But let's be clear, a 1% tax rate (basically 0%) with a tax treaty with Canada is pretty hard to beat for any competitor. Again 11.5% better than any company using Ireland.

[doughishere]

Ackman will digest this. You can't keep him down. People keep equating this to "salad oil" Scandal. They are wrong. This may be his "Salomon Brothers" moment. Pershing Square shares are at discount. Get them while there's a fire sale. Put them in your retirement account. You be an "Ackman Millionare" some day

 

You can quote me on that.

 

From Carol Lumis circa 1997:

 

(FORTUNE Magazine) – As Sanford I. Weill, 64, the dealmaking CEO of Travelers Group, steps up to his biggest acquisition ever--the purchase of Salomon Inc. for $9 billion--a famous Wall Street figure, Warren E. Buffett, 67, steps out of Salomon. His days there began almost precisely a decade ago, in the early fall of 1987, when his company, Berkshire Hathaway, became Salomon's largest shareholder and he moved in as a director. But that was training-wheels stuff, nothing to the high-wire unicycle act that came later: Buffett was physically, emotionally, and really at Salomon for nine months in 1991 and 1992, when the firm's trading illegalities created a giant sucking sound that brought him in to run the place.

[rpadebet]

I would rather Ackman goes for now.

Publicity isn't good for VRX business model ( cutting r&d, raising prices, low tax rate, high debt load)

 

Publicity isn't good for their business model?  Perhaps because of the unquestionable immorality?

 

-CM

 

Ha ha - I expected someone to get back with this comment or the one about sunlight being best disinfectant for cockroaches...

 

Anyway

 

Cutting r&d : they buy r&d. It is like take out food instead of cooking your own meal. I don't think it's immoral:)

 

Raising prices: you shouldn't be in any business if you don't like raising prices. If you can't raise prices, you won't be in business for long anyway. And please don't tell me morality has a specific % threshold. If raising prices 5% is moral, 100% is also. I will agree with you if you say raising prices a lot is bad business judgement but not immoral.

 

Low taxes: I don't think I need to get into this. If paying high taxes was moral, we should all be paying more than the government says we owe them.

 

High debt: nothing immoral about it. Could be stupid if handled badly, otherwise I don't see a problem here.

 

In a capitalistic system, none of this is immoral. In fact these lead to efficiency of consumption of resources and that is highly moralistic.

 

But yes - you can't defend this in media where the current theme is tilting towards socialism. Heck a socialist raised this first.

 

[petec]

Raising prices: you shouldn't be in any business if you don't like raising prices. If you can't raise prices, you won't be in business for long anyway....In a capitalistic system, none of this is immoral. In fact these lead to efficiency of consumption of resources and that is highly moralistic.

 

 

Sorry but this isn't right.  Free markets achieve optimal resource allocation and efficiency via a balancing of supply and demand in a competitive environment.  The result is that prices fall to cost plus a return on capital (itself subject to competitive pressure).  All businesses can therefore raise prices when costs rise, but only to the point where demand dwindles.  This is true for even the widest-moat businesses, e.g. Coke.  The moat may give it a higher return on capital than other businesses, but its ability to raise prices is most surely limited.

 

The exception is where companies have a monopoly over a necessity.  Some drugs look like this and NB the monopoly position arises not for free market reasons but because of regulation.  Abusing this monopolistic position a) doesn't make resource use more efficient and therefore isn't moral, and b) invites competition either when the patent expires or by making the regulator look hard at whether the system is working right.

[rpadebet]

Sure, patent law creates an artificial monopolistic situation. But we as a society created this law because we wanted to incentivize people to invent things. As a society, I guess we then felt that even though patents could lead to inefficient monopoly for limited time, the benefit of new inventions out weighs that as a whole.

 

I personally think our patent laws need revision. Especially with regards to drugs where minor changes in mixture, molecule or delivery is granted a new patent. I think full blown patents should be limited to true inventions. Minor modifications could probably be used to extend patent life for a year or two at a time if proven useful.

 

Again, I agree with you on the inefficiency this introduces at specific product level, but it is not because of inherent immorality of drug company but due to one size fits all regulations. The solution cannot be more regulations to control price increases.

[writser]

The solution cannot be more regulations to control price increases.

 

But it probably will be.

[jay21]

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

 

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

 

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

 

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

 

Here is JP Morgan unlevered fcf forecast

 

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

Unlevered Free Cash

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

 

I'm attaching management revenue forecast.

 

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

 

Thanks - I meant a link to the whole merger doc. Do you have it? What's the standard form number so I don't have to ask again.

 

Thanks