VRX - Valeant Pharmaceuticals International Inc.

[doughishere]

Andrew Left is now long Valeant. Beautiful.

 

http://www.bloomberg.com/news/articles/2016-05-16/short-seller-andrew-left-says-valeant-s-a-buy-as-big-funds-exit

 

Best thing about this business....in a moment you can switch around your trade and go the opposite

[AzCactus]

Very interesting.  Like watching a basketball game, I'll stay in the stands and cheer not try to play. 

[doughishere]

Very interesting.  Like watching a basketball game, I'll stay in the stands and cheer not try to play.

 

Trust me I'm struggling with the irony...An astute observer can do well from the sidelines. The trick is to add value.

 

This game is just information arbitrage. That's all it is. Watch Lebron James intercept a pass. He just arbitrages the pass and intercepts it. Steph Curry, well his arbitrage is taking 3s from 6 steps behind the line vs 1...defenses are left saying it can't be done....ackman use to go short them long. I think Tilson did it GGP

 

I often equivalate the markets to the NBA where EVERYONE is a player....you are up aginst the Lebron James' and Steph Curry's....in order to just keep up with them you have to practice like they do....and that only gets you the table.

 

 

[muscleman]

Andrew Left is now long Valeant. Beautiful.

 

http://www.bloomberg.com/news/articles/2016-05-16/short-seller-andrew-left-says-valeant-s-a-buy-as-big-funds-exit

 

 

“I’m long for a trade,”

 

 

I think he might be just long for a short term bounce.

 

He is never a value investor. Look at his other long thesis BBRY.  :)

 

It is ironic that a while ago when VRX was 25 and I said my friend bought calls for a trade, people here are being so sarcastic. Now Andrew Left is long, people cheer.

 

Of course, I didn't say VRX is not a good long at this level. I am just saying people want to hear from other people who agrees with him.

[fareastwarriors]

Valeant Said to Weigh Sale of Skin, Cancer Drugs to Reduce Debt

 

http://www.bloomberg.com/news/articles/2016-05-17/valeant-said-to-weigh-sale-of-skin-cancer-drugs-to-reduce-debt

[xtreeq]

Not exactly the white knight that Valeant shareholders were looking for.

 

Because he's the hero Valeant shareholders deserve, but not the one they need right now. So we'll hunt him. Because he can take it. Because he's not our hero. He's a silent guardian. A watchful protector. A Dark Knight.

[Guest roark33]

This is A+ work here xtreeq.  If you are ever interested in a position at Sarcasm Capital, we are always looking for highly skilled craftsmen. 

[fareastwarriors]

Valeant Rejected Joint Takeover Approach From Takeda, TPG

 

Advance came this spring, before beleaguered drugmaker hired Joseph Papa as CEO

 

http://www.wsj.com/articles/valeant-rejected-joint-takeover-approach-from-takeda-tpg-1464304905

[Guest Schwab711]

Valeant Rejected Joint Takeover Approach From Takeda, TPG

 

Advance came this spring, before beleaguered drugmaker hired Joseph Papa as CEO

 

http://www.wsj.com/articles/valeant-rejected-joint-takeover-approach-from-takeda-tpg-1464304905

 

Valeant has high hopes for the drug, predicting it could have $1 billion in sales this year.

 

The screenshot below has been quoted countless times in this thread. VRX is so far from their original projections. I am very skeptical of the veracity of this report. It doesn't make sense to me that TPG would want the other products or that VRX could be sold for more than their debt.

[tng]

Takeovers are often contingent on due diligence, so we have no idea how realistic the odds are of the takeover happening. You can imagine a fraud refusing to entertain a takeover attempt, even at a very high price, because his fraud would be uncovered or because he knows that the bidders would run of the hills once they look behind the curtain and that would be a red flag for investors and regulators. I am always suspicious of news released like this because you don't know if it is actually good news or if it is a leak designed to give a temporary boost to the stock price.

[Graham Osborn]

I have small position in VRX 2018 puts @ $2.50 strike (yes, the decimal is correct) which I bought after Left went long.  This is because the common is worth at best $25/ share neglecting debt covenant problems that might arise, price decreases, and a declining growth rate.  I don't really have any reason for thinking the company can't be bought out by a greater fool (look at what Teva and Allergan are doing) except that it would be wrong for that to happen.  If you go back to Worldcom and Enron, something like that could have happened but it never did.  It happened with banks and insurers in 08-09 but the government was guaranteeing assets.

 

One thing that needs to be remembered is that VRX's precipitous price decline occurred on a dearth of fundamental news.  The buy side obviously has recognized the balance sheet problems but these are still not a topic of public discussion.  When they are, you'll know it because people will start going to jail.  Given that absence of public discussion, my perception is that both the lay public and certain would-be strategic buyers view VRX as this great undervalued opportunity.  They don't understand that sales are probably near their peak given the R&D cuts and the debt load would be dead weight on their own operating performance within 5-10 years.

 

Remember - a relatively small change in the value of VRX's assets is sufficient to wipe out the common.  M&A tends to exaggerate premia or discounts.  Isn't it possible the bid was rejected because it was "laughably" low?

 

This whole business of buying VRX for a bounce or takeover offer may be right, but it does not fit my style.  I like to long businesses I think can take off and short businesses I think will go bankrupt based on their fundamentals.  The markets are not always just, but they often are.

[alpha asset strategies]

I'm interested in hearing others' opinions regarding the sum-of-the-parts valuation of Valeant.  In a liquidation scenario - which almost certainly won't happen - could VRX be sold off in pieces for more than its current enterprise value?

[Eye4Valu]

"One thing that needs to be remembered is that VRX's precipitous price decline occurred on a dearth of fundamental news." 

 

A dearth of fundamental news? What, the overblown story about Philidor? The notices of default that could easily be cured within the cure period? I'm not trying to defend Valeant or provide some puff piece, but I don't think there was a dearth of material or substantive news that caused the price decline. I think it was crowd behavior, and the crowd got scared from Citron, Pearson being out, the subsequent conference calls, Pearson being fired, the Congressional hearings and lawsuits. Valeant became a pariah. You seem to agree with the crowd. Maybe the crowd is right, but we need to see a few quarters of earnings and see how they address the debt before we can declare that the fat lady has sung.

 

[Graham Osborn]

I'm interested in hearing others' opinions regarding the sum-of-the-parts valuation of Valeant.  In a liquidation scenario - which almost certainly won't happen - could VRX be sold off in pieces for more than its current enterprise value?

 

Whether there is anything left for the common depends on what growth multiple the businesses deserve in an M&A scenario.  Since VRX's acquisition accounting/ accounting of volume vs price is misleading if not fraudulent, no one knows what the organic growth rate is and hence the growth multiple.  In "Valuing Valeant" I used the historic growth rates of the component acquisitions, but that was a best case (rather than actual) scenario.

 

The pressure on VRX to start lowering its prices on some drugs with particularly large increases can only worsen the problem.

 

Yet another issue - valuations are coming down.. fast.  If credit gets tight and ready buyers aren't available, VRX will find itself in Soros' reflexive credit/ collateral scenario.

[Graham Osborn]

"One thing that needs to be remembered is that VRX's precipitous price decline occurred on a dearth of fundamental news." 

 

A dearth of fundamental news? What, the overblown story about Philidor? The notices of default that could easily be cured within the cure period? I'm not trying to defend Valeant or provide some puff piece, but I don't think there was a dearth of material or substantive news that caused the price decline. I think it was crowd behavior, and the crowd got scared from Citron, Pearson being out, the subsequent conference calls, Pearson being fired, the Congressional hearings and lawsuits. Valeant became a pariah. You seem to agree with the crowd. Maybe the crowd is right, but we need to see a few quarters of earnings and see how they address the debt before we can declare that the fat lady has sung.

 

I agreed with the crowd before the crowd agreed with the crowd.  Now I am more bearish than the crowd because I think the company will be bankrupt within 2 years' time.  The reasons the stock collapsed have little to do with Phillidor or the petty default notices to date (catalysts at best) and everything to do with the value of collateral/ ability to service debt/ accounting gimmicks as yet undisclosed.  See:

 

http://seekingalpha.com/article/3447946-valuing-valeant

 

Why do you think VRX crumped near the same time as Glencore, ETP, and Men's Wearhouse?  And why do you think Chanos is still short?  This is just the beginning.

[Foreign Tuffett]

What are VRX's assets when you take away their ability to game the payer system? I think that's the million (billion!) dollar question. It looks to be VERY difficult for anyone not intimately familiar with the pharmaceutical space to accurately value VRX's many assets. I might even go so far as to say impossible, since almost no one is in a position to know both (a) the future regulatory regime and (b) future changes in insurance company behavior.

 

This may have already been posted, but Martin Shkreli attempted a valuation recently. See link below.

 

https://www.youtube.com/watch?v=3JlX2FRBqic

 

No position, but I'm in the bear camp on this one.

[alpha asset strategies]

Foreign Tuffett-

 

Thanks for the Shkreli valuation link.  Martin Shkreli certainly has his faults; however, I do value his opinion with regard to pharma companies.

 

I'm still trying to determine if KKR's reported $22 billion offer for Bausch & Lomb a few weeks back was legitimate or not.  If that was a legitimate offer, my thinking was that should put some sort of floor (ie. margin of safety) under VRX's stock price.

 

The other big issues for me are potential future government regulations that could harm VRX and whether all of the accounting shenanigans have been exposed.  With the recent filing of the 10-K, I would like to hope that the auditors did their job and that the accounting can be trusted.  With regard to future government regulation in the pharma sector, I think those fears may be overblown.  While price increase caps may certainly be implemented on some drugs, I just don't see the government decimating the entire pharma sector - as many are now predicting.  The pharma sector has one of the strongest lobbying groups in Washington.

 

The thing that I keep going back to is that, despite all of their issues, VRX certainly owns some valuable drugs / brands that several of their competitors would love to own.  In my mind, that should put a floor under the stock - at least at some price above $0.

 

At the end of the day, I just think that Ackman will be willing to use every imaginable financial engineering trick in his playbook in order to increase (or at least support) the stock price.  While I certainly do not see the stock returning to $200 / share - or even $100 / share - anytime soon, I do see a decent risk vs. reward scenario at current levels.

[Eye4Valu]

All good points. This one will be interesting to revisit in a few years.

[doughishere]

B-Mac.

 

http://www.vanityfair.com/news/2016/06/the-valeant-meltdown-and-wall-streets-major-drug-problem

[Txvestor]

Utterly disgusting behavior.

Completely agree with Charlie Munger, sewer is probably the most appropriate word to describe it.

Ackman has lost an enormous amount of credibility with this investment and I'm not sure it will be easy to resurrect that. I mean anyone can make a mistake and end up looking bad and even the great

WEB had a near miss with Salomon but I mean the light this shed on his Allergan shenenigans etc and his lack of deep due diligence makes you wonder about his real methods of generating returns. He's atleast a decade of success away from being anything close to the perch he used to have pre-Valeant.

At this price level it belongs in the too hard pile as there are too many unknowable things to value with any seriousness. Investors might make money or it could be worth less than debt based on various assumptions/outcomes.

[doughishere]

Yeah I'll admit it I was wrong a few moths ago....it is pretty bad. I don't think it's a zero but I don't want that trade.

 

 

I wonder if there are going to be wrongnfull death lawsuits.....

[randomep]

B-Mac.

 

http://www.vanityfair.com/news/2016/06/the-valeant-meltdown-and-wall-streets-major-drug-problem

 

The way I read the article. The problem with the drug mentioned is that there is no generic only because the FDA is backlogged. So Valeant can charge $20k+ for a 60yr old drug. I guess there also isn't a push to make generics for this disease cos it is so rare but FDA should have faster process for a generic? Don't you think?

[doughishere]

B-Mac.

 

http://www.vanityfair.com/news/2016/06/the-valeant-meltdown-and-wall-streets-major-drug-problem

 

The way I read the article. The problem with the drug mentioned is that there is no generic only because the FDA is backlogged. So Valeant can charge $20k+ for a 60yr old drug. I guess there also isn't a push to make generics for this disease cos it is so rare but FDA should have faster process for a generic? Don't you think?

 

 

Yeah....Even if that is the case,  I think shareholders should look themselves in the mirror and ask .....do they really want to be apart of that......that's some nazi level shit in my book.

 

Call it for what it is. That doesn't even compare to a "rogue" trader......It will be interesting how they treat Person vs Shkreli...1000% vs 5000%....30% returns in investing is good....for comparison.

[doughishere]

Earnings tomorrow.

 

http://www.wsj.com/articles/valeant-earnings-here-we-go-again-1465142117

 

 

Hedge Fund ValueAct Capital's Valeant Legacy.

http://www.forbes.com/sites/nathanvardi/2016/06/06/hedge-fund-valueact-capitals-valeant-legacy/#3249c9391df0

[Guest roark33]

http://ir.valeant.com/news-releases/2016/06-07-2016-110324216

 

The underlying business just isn't that great and they will not be able to paper over that with acquisitions any longer.  Check out derm declines and credit line drawdown. 

 

The reality at this point is these are now wasting assets that can no longer be replaced, so you are up against a ticking time bomb of debt with a questionable runway for how long each product will last.  Now that insurance is no longer playing bat, the profitability of all of these headline revenue numbers is in serious doubt.