Bill Ackman is holding a conference call this morning at 9AM EST on  Valeant Pharmaceuticals Intl. As we noted last night, bad news keeps hitting the company at a rapid pace. This morning the trend has continued.

– Valeant Pharmaceuticals  announced today that it is severing all ties with Philidor Rx Services, LLC, and that Philidor has informed Valeant that it will shut down operations as soon as possible, consistent with applicable laws. Also just breaking now, Valeant has hired the ex U.S. Deputy Attorney General Mark Filip as an adviser. Herbalife just totally trolled Ackman releasing the following statement:

LOS ANGELES–(BUSINESS WIRE)– Global nutrition company Herbalife (NYSE: HLF) today issued the following statement regarding a presentation by Bill Ackman:

“I hope Bill Ackman has done more research on Valeant than he did on Herbalife, Target, Borders and JC Penny,” said Alan Hoffman, executive vice president, global corporate affairs, Herbalife.

“The newest allegations about activities at Philidor raise additional questions about the company’s business practices,” said J. Michael Pearson, Valeant’s chairman and chief executive officer. “We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant and the patients and doctors we serve.”

Morgan Stanley has  a new research titled “Did Philidor’s noncompliance include mail order Achilles’ heel?”

The analysts state:

CVS and ESRX have both terminated Philidor from their pharmacy network. We est Philidor contributed over 50% of YTD U.S organic growth, but downside risk may be mitigated through use of other pharmacies. Remain EW VRX given risk of ongoing scrutiny, but we believe fraud concerns may be overblown.

Meanwhile,Umer Raffat, respected analyst at Evercore ISI, states:

Investor calls that I was fielding last night generally had the same feeling: Valeant should do away with Philidor – this shouldn’t linger on. Valeant’s press release this morning severing all ties to Philidor is a step in the right direction.

Meanwhile, additional documents became available that provide more insights into the R&O vs Valeant litigation. Key highlights include: email from R&O saying its “eager” to start dispending Valeant product, more invoices, details around product/$ flow between Valeant, Philidor and R&O, and indemnification clause.

ValueWalk will be live blogging the Ackman /  Valeant conference call and readers can also view the audio of the call below.


The company is currently trading down approximately 10% in pre-market hours to about $100 a share.

9:10AM EST Ackman says we cannot disclose information that can create competitive disadvantage unless required by law. Ackman starts off with a history of the company, talking about Mike Pearson and the early days. The focus is on ROIC, R&D with risk adjusted returns. The company grew rapidly organically and through acquisitions. Company is under a lot of regulatory scrutiny and has acquired some companies which have troubles.

9:15 Ackman this is complicated company and GAAP is not good metric. He notes some great investors such as Lone Pine, SEQUX etc. and companies get the shareholders they exist. Companies like this need to be transparent – investors are willing to accept integrity of company is transparent. VVRX has not invested enough in public relations and government relations.

9:20 We started following Valeant related with AGN in late 2014. We started building a stake when we were legally allowed to. Note: Lots of technical issues and operator I believe called Ackman “Ackerman”. Ackman notes recent events and the excitement started with Martin Shkreli

9:25: investors also have been confused despite good earnings, Ackman claims. Ackman cites Citron report and the company held a call and last night three large PBMs cut ties and this morning Philidor news Ackman says he thought of $AMZN last night why are they not the biggest pharma?

VRX does not control Philidor and then talks about latest news. Ackman talks about the beginning of Philidor in 2012, in Dec 2012 VRX acquired this company. They are also associated with …. Ackman did not mention the name of Philidor but mentioned it many times in previous conference calls. VRX bought option for $100M on Philidor but it is a SEPARATE company.

9:30 A lot of this is no longer relevant because Philidor is not owned but Ackman gets into the history of R&O. License was rejected for not explaining all the owners, although they mentioned all the owners in other states. Isaloni is created and transfer control to it.Basically, it is license for Philidor to sell drugs in CA. R&O sales increase as VRX sells more through them. Mr. Ritz holds off on purchase and confiscates checks then Isaloni demands payment that is why VRX sent lawsuit over payments and accuse fraud.

9:35 Ackman encourages everyone to read VRX counter claim (which we posted last night). He talks about the $69 million payment which short-sellers have jumped on.





Mr. Reitz changes his view on the issue. It appears that Reitz wanted to sell for $350K then sales ramped and he wanted a much higher price. When parties did not agree, he stirred up a lot of dust. In Sep 2014, VRX discusses medicis and Philidor even though they do not mention them by name. Peason mentioned it on a conference call – You do not see all the sales on….. ecause some of them were going through specialty pharma. Ackman mentions Hempton SIRF (Roddy Boyd) started mentioning Philidor and then the company mentioned it by name?

Ackman turns over the call for a high regulatory overview (Ackman’s words). Headlines are drowning out talking points – business is highly regulated by state and Fed Government. Regulations not always intuitive even if they make sense not always allowed.


Oct 21st the Citron report comes out and calls it the next Enron the stock collapses and VRX waited to respond. A blogger attacks them the next day and then the media blitz starts.

9:40 There are many potential issues in this business as the above slide shows. When inquires arise issues taken carefully but things take time. If a company crosses the line it involves settlements and other penalties. Even the largest companies have paid big judgement but business has gone on as the slide below shows. We are not saying this applies to Valeant.

9:45 The process will play out over the next couple of years. NOTE: Ackman is basically saying all drug companies have issues but business goes on.


Ackman notes that Novartis is a good case to note. NVS also involved the specialty pharmas which are at play here. The DOJ investigated and in April 2013 alleged two kickback schemes one had to do with conversion process with specialty pharmas where they switched prescribed patients to NVS drugs in return for payments – many pharmas were involved here. The second scheme that was alleged had to do with a different drug an a specialty pharma which supposedly gave biased medical advice to switch to NVS drug. It was a meaningful case and took four years to settle.