![Bill Ackman On Valeant Conference Call [SLIDES]](https://www.valuewalk.com/wp-content/uploads/2015/10/Valeant-Bill-Ackman.png "Bill Ackman On Valeant Conference Call [SLIDES]")
Bill Ackman’s slides from his investor conference call on Valeant.
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Valeant Pharmaceuticals International (VRX)
- Multinational specialty pharmaceutical company
- Leader in dermatology, ophthalmology, branded generics, and gastroenterology
- Significant presence in both developed and emerging markets
- Market cap of ~$40bn and TEV of ~$68bn
- Approximately 40 manufacturing plants worldwide
- ~18,000 employees(1)
Valeant: Context on the Company
- In February 2008, when Mike Pearson was named CEO, Valeant was a small, struggling company
- Pearson changed Valeant’s strategy to incorporate:
- A durable, diverse portfolio of products in specialties where doctors are decision makers, with limited government reimbursement
- Decentralized, efficient, nimble organizational structure
- Return-driven capital allocation framework (M&A, high ROI R&D, buybacks)
- Rapid growth
- Diverse portfolio of products
- Numerous drivers of value creation
- Numerous acquisitions
- Purchased distressed assets, inherited multiple Corporate Integrity Agreements
- Utilized leverage
- Valeant’s business and strategy are complicated to understand; GAAP accounting is an inadequate measure of an acquisitive company
- Investor base has historically consisted of sophisticated, long-term investors (Ruane Cunniff & Goldfarb, T Rowe Price, ValueAct, Lone Pine, Brave Warrior, Brahman Capital, etc.)
- Valeant’s complexity necessitates:
- Strong, high-integrity management
- High level of transparency
- Anything less than complete transparency leaves Valeant susceptible to attack
- Valeant’s implicit compact with shareholders: in exchange for high returns, investors accept complexity so long as there is transparency
- Valeant has underinvested in public relations, government relations, and investor relations. This has been a very costly mistake
Valeant: Recent Events
A. Price Increaces
- Volume is primary growth driver for ~90% of Valeant’s business
- Media reports are focused on gross prices; net realized prices to manufacturer are much lower
- Drugs improve health outcomes and can reduce overall cost of healthcare; returns on investment critical to drug innovation
B. VRX’s Perceived “Strategy Shift”
How Value Investors Can Win With Tech And “Fallen” Growth Stocks
Many value investors have given up on their strategy over the last 15 years amid concerns that value investing no longer worked. However, some made small adjustments to their strategy but remained value investors to the core. Now all of the value investors who held fast to their investment philosophy are being rewarded as value Read More
- VRX’s strategy is multi-faceted, focused on creating shareholder value, adapts with opportunities:
- M&A: No more “price increase” deals (only 4 of ~150 historical acquisitions)
- R&D: Increasing modestly to pursue attractive late-stage development opportunities
See full slides below.
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