VRX - Valeant Pharmaceuticals International Inc.

[giofranchi]

Financial staying power requires a company to maintain three strengths under all circumstances: (1) a large and reliable stream of earnings; (2) massive liquid assets and (3) no significant near-term cash requirements. Ignoring that last necessity is what usually leads companies to experience unexpected problems: Too often, CEOs of profitable companies feel they will always be able to refund maturing obligations, however large these are. In 2008-2009, many managements learned how perilous that mindset can be.

--WB 2014 AL

 

Just food for thought ;)

 

Gio

[cemadh]

I am very much concerned about the debt levels. But as gio pointed out, debt levels will always remain high as long as Pearson is in charge and he keeps acquiring and integrating. If you trust in Pearson, then high debt should not be a problem per-se. My concern (or observation) is that the stock has run up too much. Look at the attached spreadsheet. Even if I assume $10 billion of sales in 2015, the P/S ratio (at 6.9) is higher than it has ever been in the last five years. If I assume 9.2 billion of sales and change the share price to $240, p/S shoots up to 8.9. It has never crossed 6.7 in the last five years. And all this assumes no additional shares!! Also, in my first scenario, the share price does not go anywhere (as assumed) for the next 10 months and yet the P/S is above average. Time to reduce or exit?

Comments please!

Valeant_Ratios.xlsx

[giofranchi]

Time to reduce or exit?

Comments please!

 

Ah!!... I am still a bit cautious, but actually I am gradually adding… Not reducing nor exiting!

As I have said, after what happened in 2014, I have become much more comfortable with VRX’s business model… And I think the most likely scenario by far is rapid growth for the next 5-8 years.

If rapid growth materializes, those ratios will get compressed very soon! ;)

 

Gio

 

[giofranchi]

Also, like wellmont has rightly pointed out, Cash EPS might reach $15 very soon… Therefore, what have we got here? A company whose quality is much higher than the average S&P500 company, selling for 13.5 x Cash EPS; while the S&P500, whose average quality is much lower than VRX’s, is selling for 20 x EPS…

Not bad! :)

 

Gio

 

[cemadh]

Thanks Gio.

Any estimate on what additional revenues will be obtained if FDA approval for XIFAXAN® 550 for the treatment of IBS-D  is obtained in May 2015? Sorry if this was covered in an earlier post.

 

I started trimming VRX after it crossed $160. Then I stopped. After VRX crossed $200 I have been trimming more. Now the trimming bug has bitten me again :-)

I am ignoring tax impacts of the capital gains because these shares and LEAPS were/are in my IRA.

[Liberty]

I am very much concerned about the debt levels. But as gio pointed out, debt levels will always remain high as long as Pearson is in charge and he keeps acquiring and integrating. If you trust in Pearson, then high debt should not be a problem per-se. My concern (or observation) is that the stock has run up too much. Look at the attached spreadsheet. Even if I assume $10 billion of sales in 2015, the P/S ratio (at 6.9) is higher than it has ever been in the last five years. If I assume 9.2 billion of sales and change the share price to $240, p/S shoots up to 8.9. It has never crossed 6.7 in the last five years. And all this assumes no additional shares!! Also, in my first scenario, the share price does not go anywhere (as assumed) for the next 10 months and yet the P/S is above average. Time to reduce or exit?

Comments please!

 

Phil Fischer:

 

http://i.imgur.com/SIgHeaa.jpg

[giofranchi]

Any estimate on what additional revenues will be obtained if FDA approval for XIFAXAN® 550 for the treatment of IBS-D  is obtained in May 2015?

 

No, I am not sure… Maybe Liberty could be of some help... Though, I would say this: differently from a quote by Morningstar which appeared some posts ago, I think XIFAXAN proves that VRX’s strategy of buying R&D that looks promising, instead of spending too much money on it internally, has been followed also with the Salix acquisition. Therefore, imo Pearson is very consistent in what he is doing. :)

 

Gio

 

[giofranchi]

Phil Fischer:

 

Thank you, Liberty!

I didn’t remember Fisher’s quote, but that’s exactly my thought as well: I am buying VRX because I now feel much more comfortable with its business model, in spite of the fact the price of its share has gone up significantly. ;)

 

Gio

 

[cemadh]

Thanks Liberty. I know this but I truly do appreciate being reminded about this. I missed multi-baggers in Google, Visa and Mastercard because of my asinine way of thinking that the stock has run up too much or that the P/E is too high or some such incomplete thinking.  What makes matters worse is that I have been successful at this for the last seven years. That is - trimming winners to get into better performers - or re-entering at lower prices. I know that the last seven years is an artificial (read incomplete or wrong) and, Fed interest rate induced time frame, that has skewed my outlook.  As I said earlier, these moves are in my IRA - so the 30% or 35% does not apply.

 

However, I must say that it is not just the P/S ratio that makes me nervous. My other concerns are below. I know these are not new concerns and that they have been raised in this forum before.

a) Salix has medical insurance dependent revenue. Dendreon's Provenge is of course a prescription med. Both these acquisitions are (in my mind) a shift away from Pearson's tried and tested method of entering into products/spaces that other pharma companies do not want or are not dependent on insurance reimbursements.

b) It is easier to be lean, cut R&D and do all the other stuff when you are smaller. As the company grows bigger, and takes on more and more employees and products, I believe Pearson's methods will become harder to implement (for him).

c) It is easier to double a $30 billion company than to double a $68 billion company.

d) The debt, the debt, the debt  :'(  :(

[Liberty]

cemadh, Valeant was trading around $10/share when Pearson joined, and soon after that he special-dividended almost $20. Now the stock is around 200. If you had bought at $10, how far up would you have had the conviction to hold?

 

If you're buying AIG below book because you think it's worth book, then when it goes to book, you should probably consider selling because it's a slow-growing business and your results from that point will probably be fairly mediocre (especially if capital gain taxes don't apply in your case). If you're buying a high-quality business that is rapidly growing, creating value by organic growth and by M&A through a proven model, then selling it every time it looks a bit expensive probably means you would be the guy who bought VRX at $10 and sold it when it got to 16.

 

I'm not seeing style drift with Salix and Dendreon, and I think they just showed great discipline with Allergan (not overpaying, walking away though they could no doubt have matched Actavis and still have done well, the IRR would've been lower than what they look for). No deal has been entirely perfect so far, and I'm sure people could find reasons to complain about biovail/medicis/B&L/PreCision/etc too, just like people complained when Buffett bought BNSF or IBM.

 

At some point they mentioned that B&L was probably a more complex restructuring job than AGN would have been, because it had more employees and products/manufacturing (memory fuzzy on details here). Market cap is not always an indication of complexity, and if there's a model that can handle it, it's their decentralized model (as Berkshire has shown). Valeant is more like a holding company with lots of small semi-independent P&Ls than a big centralized organization - like most other pharmas - that crumbles under its own weight as it grows.

 

"It is easier to double a $30 billion company than to double a $68 billion company."

 

I'm sure people were saying that about Apple/Berkshire/Google/Mastercard/etc at all points of their growth. The question is, does your analysis leads you to believe that they are running into real barriers to growth (either internal or external), or are you just looking at the numbers and being scared because they are big? They are operating around the world in a multi-trillion industry (trillions in public markets, trillions in private hands).

 

If you don't like debt, don't invest in companies that incorporate it in their model (ie. Malone is probably not for you). That's all I can say. But here again, the question isn't how big the debt is in absolute numbers, it's how big is it compared to true earning power, how fast are those earnings growing, how stable are cashflows, how diversified are cashflows, what did they get in return for the debt (did they get more value than they gave?), etc. It'll also be interesting if the company can get to investment grade in the mid-term, how that'll reduce how much they can refinance the old debt for...

 

Bottom line for me, VRX is still trading pretty cheaply when you look ahead at cash earnings for the next couple years, and I expect management to keep under-promising and over-delivering and find other ways to create value. My time horizon is 10 years, and over that time I'm sure there will be times when things look better than others, but as long as I'm not seeing real red flags, I don't think it's wise to sell just because the stock price went up.

[giofranchi]

"It is easier to double a $30 billion company than to double a $68 billion company."

 

I'm sure people were saying that about Apple/Berkshire/Google/Mastercard/etc at all points of their growth. The question is, does your analysis leads you to believe that they are running into real barriers to growth, or are you just looking at the numbers and being scared because they are big? They are operating around the world in a multi-trillion industry (trillions in public markets, trillions in private hands).

 

I agree 100% ;)

 

Gio

[ccplz]

Valeant certainly has an interesting business model. Since 2008, it's acquired 40 companies and owns ~1,500 compounds. Valeant also isn't stupid and they know that drugs are getting too expensive to develop. As a result, a reasonable route is to acquire all of your products and then take advantage of a strong distribution network to maximize revenue.

 

Most large pharmaceutical companies know that biotechs are more efficient at drug development and that a combination of their R&D and your own R&D teams enables a strong pipeline. Where Valeant differs is that they completely disregard the role of a Pharmaceutical company as a scientific organization and the moment they acquire a company, they downside the entire R&D organization liquidate the drugs in development and take the remaining compounds to market. They are also very public about this opinion. Pfizer may have the reputation of axing R&D jobs but they would never actually admit it.

 

This report from Valeant on their views of R&D is informative of their strategy. They cite Steve Jobs who also isn't a big proponent of R&D.

http://www.valeant.com/Portals/2...

 

From that slide, you can also see that their entire R&D staff is 748 employees. For comparison, a single NIBR campus can contain as many as 500 employees.

 

I think that the interesting thing about Valeant is that despite it's clear goals to reduce expenditures and maximize shareholder value, it's still carrying a lot of debt and it's P/E ratio. They have a lot of aspirations to become a top 10 pharmaceutical company so I would imagine that they are trying to get there by their aggressive growth strategy and then take advantage of synergies.

 

So what do I think of this? It's an absurdly good way to be disruptive and acquire a huge drug portfolio with relatively little risk. Michael Pearson has essentially build the corporate version of Carl Icahn.

 

I don't know if it's sustainable. From a wolf-sheep growth model, if there are too many wolves, there won't be any sheep left. If another company decides that they are going to pursue an aggressive M&A strategy but offer to keep the R&D branches around, shareholders might lean that way instead and Valeant might get stuck with all of the poor performing drugs. Biotech companies might evolve to seek alternative pharmaceutical-biotech partnerships to bridge the development gap. After watching Allergan's drawn-out battle to avoid a hostile takeover, several companies have learned. Finally, since it is drug production, there does need to be some degree of scientific culture since some compounds are rather troublesome to produce and require a decent amount of development support.

 

This also is a total war approach to doing drug development. Valeant doesn't even bother to divest their assets, they just gut a company. The problem is that this leave billions of dollar on the table with hundreds of late stage drugs left in limbo with no one left driving the programs forward. As a development guy, that just makes me cringe.

 

So far it's working out for Valeant. If there is someone who can take over Pfizer's hated spot in society I guess it can be them.

 

[Liberty]

Most large pharmaceutical companies know that biotechs are more efficient at drug development and that a combination of their R&D and your own R&D teams enables a strong pipeline. Where Valeant differs is that they completely disregard the role of a Pharmaceutical company as a scientific organization and the moment they acquire a company, they downside the entire R&D organization liquidate the drugs in development and take the remaining compounds to market. They are also very public about this opinion. Pfizer may have the reputation of axing R&D jobs but they would never actually admit it.

 

This report from Valeant on their views of R&D is informative of their strategy. They cite Steve Jobs who also isn't a big proponent of R&D.

http://www.valeant.com/Portals/2...

 

From that slide, you can also see that their entire R&D staff is 748 employees. For comparison, a single NIBR campus can contain as many as 500 employees.

 

Your link doesn't work, could you repost it?

 

Be careful about the number of R&D employees and such. They outsource a lot of it (CFO has often mentioned that in many case there's an oversupply in the sector, so they can outsource projects to external labs at very low costs), and still develop a lot of it, just from a much more rational approach (zero-based budgeting, as opposed to a pre-set annual budget ("let's spend X% of revenue on R&D"), more reformulation and extension stuff with more certain outcomes, etc. ). Their pipeline seems pretty strong despite the lower spend, and Jublia, for example, is already growing to be one of their top drugs despite being just launched.

 

As for Steve Jobs, he didn't believe in having a separate R&D function in the company. He thought that everything should be about products, and any R&D should be done by the product people in service of the products, not off in a separate lab somewhere, and after they come up with something, product people see if they can do something with it (kind of the Microsoft approach - over the years I've seen tons of great demos out of their labs, but almost no actual products that shipped). So when R&D isn't separate, it might seem smaller, but it doesn't mean that there's not a lot of actually R&D going on.

[original mungerville]

I am very much concerned about the debt levels. But as gio pointed out, debt levels will always remain high as long as Pearson is in charge and he keeps acquiring and integrating. If you trust in Pearson, then high debt should not be a problem per-se. My concern (or observation) is that the stock has run up too much. Look at the attached spreadsheet. Even if I assume $10 billion of sales in 2015, the P/S ratio (at 6.9) is higher than it has ever been in the last five years. If I assume 9.2 billion of sales and change the share price to $240, p/S shoots up to 8.9. It has never crossed 6.7 in the last five years. And all this assumes no additional shares!! Also, in my first scenario, the share price does not go anywhere (as assumed) for the next 10 months and yet the P/S is above average. Time to reduce or exit?

Comments please!

 

Phil Fischer:

 

http://i.imgur.com/SIgHeaa.jpg

 

This is a bit how I view Valeant. The stock price bouncing around is not all that relevant as earnings can quadruple over the next 5-7 years (25% compounded growth). So if its going from $200 to $800 per share, do I care that much if I pay $120, $150 or $200 for the shares. Obviously a bit, as the lower the price paid, the higher the percentage upside AS WELL AS the lower the percentage downside if something goes wrong. But overall, if we are right on the business, and they don't make a major blunder, the added profits from compounding should dwarf the added profits from a good entry price.

 

 

 

[giofranchi]

I don't know if it's sustainable. From a wolf-sheep growth model, if there are too many wolves, there won't be any sheep left. If another company decides that they are going to pursue an aggressive M&A strategy but offer to keep the R&D branches around, shareholders might lean that way instead and Valeant might get stuck with all of the poor performing drugs. Biotech companies might evolve to seek alternative pharmaceutical-biotech partnerships to bridge the development gap. After watching Allergan's drawn-out battle to avoid a hostile takeover, several companies have learned.

 

Watching from the sidelines at the “struggle” with Allergan in 2014 and all those attacks on VRX’s business model, I think I have gained confidence in the following:

 

With the exception of too much debt, which may cause trouble anytime, VRX’s business model will continue to be greatly successful for at least the next 5 years.

 

Because:

 

1) The lifecycle of their existing products is never shorter than 5 years (sometimes it might be quite longer), and therefore for at least that period of time organic growth should continue to be satisfactory enough. In fact, VRX has responded to all the attacks on its lack of organic growth with very convincing numbers! Therefore, imo their existing products have proven they can grow (anyway, like I have said, I am gradually building a new position in VRX, because the more evidence I get the better! And the next two quarters will be very useful in this regard).

 

2) It is difficult for very large organizations, like big pharmaceutical companies undoubtedly are, to change direction and to do it quickly. VRX might have to deal with more competition in M&A in the future, but it takes time for big pharma to adapt and copy VRX’s business model.

 

That is why I have basically gained much more confidence in VRX’s business model… at least for the next 5 years!... But, sincerely, who cares for more?! If during the next 5 years VRX has the opportunity to triple in size, who really cares about year 6?… Five years from now we simply will start a new conversation about VRX and decide what to do with this investment! ;)

 

Cheers,

 

Gio

 

[Liberty]

I think the premise that what Valeant does is a scorched earth strategy of cutting all R&D and not caring about the future is incorrect, so it's not worth refuting. It's the meme that Allergan tried to sell, and too many people seem to have bought it. Look at the organic growth of even their older acquisitions (except biovail, which was bought mostly for the tax inversion and brought billions that way), look at the new products that have been introduced as well as the pipeline. Listen to their doctors describe their approach.

 

The question isn't "should we have new products or not?"

 

It's "What should those new products be, and where should they come from?"

 

If you avoid big expensive blockbusters, highly competitive areas, and slow-growing areas, and instead go for lots of small products that aren't under generic attack (some things are more durable and harder to genericize, like skin creams), and if you source new products from very rational R&D and from bolt-on acquisitions (ie. buy a small company, plug its products into large worldwide salesforce), you can get more value per dollar invested than if you just throw a ton of money into the lab and hope to discover the next billion-dollar molecule. At some point in the past maybe the big pharma R&D approach gave good IRRs, but today it doesn't seem to be doing so, and smaller players are more effective at doing R&D. It's kind of like how big mining companies let juniors do the exploration and buy those that found something.

 

The whole wolf-sheep thing is also flawed. As I said previously, this is a multi-trillion industry. There's always a ton of stuff for sale from private equity, family holdings, big companies divesting assets. Mr. Market also offers bargains from time to time, etc. Running out of targets isn't on the horizon.

 

Valeant's strategy has never been a secret, just like Berkshire's strategy. What keeps others from adopting it is that it requires hard work, discipline, and good capital allocation skills, as well as a an owner mindset. Others can't just decide that they want to be disciplined and good capital allocators all of a sudden. Changing an established company's culture is extremely hard. That's why new models usually come from upstarts rather than from a big existing player changing its stripes. Plus, it's a lot more fun for most executives to have a fat SG&A and spend tons of money on pet projects, and have a very centralized empire to lord over. The Valeant model simply isn't appealing to most big shot CEOs.

 

Sure we're in a wave of consolidation, so there's going to be competition for big deals and multiples might increase. But Pearson has clearly said that for the vast majority of what they buy, they are the only bidder. In fact, if there's someone else interested, they probably won't be. So out of the dozens of deals they've done so far, they got into bidding wars in maybe a handful of them. If every few years they can bag a big public company, they'll do fine and can deploy many billions the rest of the time just buying private assets (like B&L, btw).

[giofranchi]

Valeant's strategy has never been a secret, just like Berkshire's strategy. What keeps others from adopting it is that it requires hard work, discipline, and good capital allocation skills, as well as a an owner mindset. Others can't just decide that they want to be disciplined and good capital allocators all of a sudden. Changing an established company's culture is extremely hard. That's why new models usually come from upstarts rather than from a big existing player changing its stripes.

 

This is very true and I agree 100%! :)

 

Pearson has clearly said that for the vast majority of what they buy, they are the only bidder. In fact, if there's someone else interested, they probably won't be.

 

The last two relevant examples, though, show that things can change: Allergan was purchased by someone else, and Salix received an offer by at least two other companies that I have heard of…

 

Gio

 

[Liberty]

The last two relevant examples, though, show that things can change: Allergan was purchased by someone else, and Salix received an offer by at least two other companies that I have heard of…

 

Gio

 

Valeant has lost a couple of bids for public companies in the past, Allergan wasn't the first (though obviously it was the biggest).

 

When you go fishing, you can't catch all of the fish.

 

As Pearson said, I don't think they "lost" Allergan. They stayed disciplined and didn't pay more than they decided they would pay, so that's a win in my book too. If the goal was empire-building, then yes, they lost. If the goal is creating the most shareholder value, then staying disciplined is a clear win long-term even when it leads to setbacks short-term.

 

If you bid for something and decide you won't pay more than $100, if someone else comes along and offers $120, should you decide to pay $130? No, you stick to the plan and walk away. What others will do is out of your control, all you can do is try your best.

 

The next time VRX bids for a big public company, attacking its stock as a currency won't work and they'll have a better track record under their belt, and Actavis will probably be out of the picture for a bit, digesting Allergan. At the size that VRX will soon be playing at, there won't be a ton of buyers who have its structural advantages (tax, low SGA) and its experience integrating companies (decentralized model ftw!). Competition will probably be scarcer for 50bn businesses than it is for 10bn businesses, but that's just a guess.

[giofranchi]

The next time VRX bids for a big public company, attacking its stock as a currency won't work and they'll have a better track record under their belt, and Actavis will probably be out of the picture for a bit, digesting Allergan.

 

I think you are right! ;)

 

Gio

[fareastwarriors]

From Sequoia Fund's letter

 

A topic many shareholders and clients wanted to discuss with us in 2014wasValeant. It is the largest holding in Sequoia by far. One could argue Valeant wasted much of the year on a quixotic effort to buy Allergan, maker of Botox. Allergan had no interest in being acquired and fought a vicious and savvy public relations campaign to portray Valeant as unworthy of marriage to such a prized catch. In the end, Allergan found a suitor more to its liking in Actavis, and Actavis agreed to pay a substantially higher price than Valeant had offered.

 

In our opinion, much of what Allergan said was wrong but Valeant seemed unprepared for what it should have known would be an aggressive counterattack. The defenses available to the targets of hostile takeovers are considerable and Valeant has now lost three hostile bids for public companies since 2011. Meanwhile, Allergan’s stock price nearly doubled over the past year without so much as a thank you note sent to Valeant CEO J. Michael Pearson.

 

Some good came out of this defeat. As it fought for Allergan, Valeant stopped making other acquisitions and so stopped taking one-time charges for restructuring and integrating its serial acquisitions. This made its financial reports easier to follow, and more investors came to see Valeant has a fine business. Most of its product categories show strong organic growth, despite claims to the contrary by Allergan. Valeant throws off sizable cash flows. It has very few products vulnerable to patent expirations in coming years. Management has done an excellent job of picking its spots, both geographically and by product category, while avoiding dependence upon a single drug. It integrated the large Bausch & Lomb acquisition flawlessly. And it proved itself capable of launching a new prescription drug, Jublia, with a highly-successful direct-to-consumer ad campaign.

 

In short, Valeant lost the battle for Allergan but we believe it is winning the war to establish itself among the first rank of global pharmaceutical companies. The stock suffered for much of the year from Allergan’s broadsides, but performed better once the takeover battled ended. We think Valeant is poised for more growth, both organic and acquired. We think it is brilliantly managed by Mike Pearson and his team. And yes, we are comfortable with the size of our holding.

 

 

from the AR,

 

Valeant made headlines in 2014 as a result of its proposal to acquire Allergan, announced in late April. We were supportive of the transaction and believe that the combination would have resulted in a stronger and more profitable specialty pharmaceutical company with powerful franchises in dermatology, ophthalmology, aesthetics and consumer products. Unfortunately, Allergan had no interest in combining with Valeant and opposed the transaction vigorously. When Actavis announced a merger agreement to acquire Allergan in mid-November for approximately $219 per share, Valeant chose to drop its acquisition proposal and move on. While we were disappointed that Valeant was not successful in its attempt to acquire Allergan, we felt the price ultimately paid for Allergan was high and were happy that Valeant remained financially disciplined, especially given that a significant portion of the deal would have been financed with equity.

 

Valeant generates substantial free cash flow and in 2014 it used those funds to reduce debt and make relatively small acquisitions. We estimate that in 2014 Valeant reduced its net debt from $16.8 billion to $14.6 billion and that the ratio of net debt to adjusted pro forma EBITA declined from above 4.5x to around 3.7x. In addition, the company spent another $1.3 billion on over 25 acquisitions. The two most significant deals completed during the year were Solta Medical for $293 million and PreCision Dermatology for $455 million.

 

 

 

Excluding the divestiture of the facial aesthetics business to Galderma, Valeant showed strong organic growth in 2014 with most business units likely increasing at a high single-digit or low double-digit rate for the year. Valeant’s growth was helped by a double-digit increase in sales from Bausch & Lomb, which Valeant acquired in the summer of 2013. Bausch & Lomb launched a number of new products in 2014 that helped drive growth. Overall, the acquisition is off to a strong start.

 

 

Prescription growth has also been very good to date, led by Jublia, a newly launched treatment for toenail fungus that has been backed by a successful direct-to consumer television advertising campaign. Jublia has the potential to become one of Valeant’s largest drugs. The company has set a goal of realizing $300-400 million in sales for Jublia in 2015 as compared to $65 million in 2014.

 

Fourth quarter results have not been reported yet, but Valeant likely earned at least $8.30 of cash earnings per share in 2014, an increase of roughly 33% over the prior year. The company has a number of drug launches scheduled for 2015, which should fuel double-digit organic sales growth. As we have mentioned in the past, we like Valeant’s approach to the pharmaceutical business and view the company as a value investor in health care products. We believe that it has pieced together a diversified and stable portfolio of products across areas such as dermatology, ophthalmology, branded generics, OTC drugs and medical devices like contact lenses.

 

 

 

[Liberty]

No idea if it's true, but there's a rumor that Ackman has taken a 5% stake in Valeant. That's why the stock just jumped.

 

 

Update: http://mobile.reuters.com/article/idUSKBN0M51PE20150309?irpc=932

[giofranchi]

No idea if it's true, but there's a rumor that Ackman has taken a 5% stake in Valeant. That's why the stock just jumped.

 

 

If this is true, I am now a larger shareholder of VRX than I had thought! :)

 

Gio

[Liberty]

If true, the question is, what's Ackman's angle?

 

Could this be a rare passive position for him, just ride along with Pearson?

 

Pearson didn't seem too excited about teaming up with Ackman again when he was asked in a recent interview, but he's nothing if not pragmatic, so if Ackman brings him the right deal, that could happen.

 

Or would Ackman be happy to just provide capital and be a kind of minority partner in some big future deals? Not sure that's his style, but he's also very pragmatic.

 

Update: From the Reuters writeup:

 

"The source, who asked not to be named, said the fund would take a passive approach to Valeant, instead of pressuring it to change management or pursue strategic options as it does with most of its investments."

 

http://mobile.reuters.com/article/idUSKBN0M51PE20150309?irpc=932

[KCLarkin]

If true, the question is, what's Ackman's angle?

 

He does take passive positions in "outsider" type companies. QSR and PAH are passive IIRC.

[Guest wellmont]

If true, the question is, what's Ackman's angle?

 

Could this be a rare passive position for him, just ride along with Pearson?

 

Pearson didn't seem too excited about teaming up with Ackman again when he was asked in a recent interview, but he's nothing if not pragmatic, so if Ackman brings him the right deal, that could happen.

 

Or would Ackman be happy to just provide capital and be a kind of minority partner in some big future deals? Not sure that's his style, but he's also very pragmatic.

 

Update: From the Reuters writeup:

 

"The source, who asked not to be named, said the fund would take a passive approach to Valeant, instead of pressuring it to change management or pursue strategic options as it does with most of its investments."

 

http://mobile.reuters.com/article/idUSKBN0M51PE20150309?irpc=932

 

how about the long game? Allergan and valeant?