Ackman Q1 Letter “We Have Made Material Progress At Valeant”

Ackman Q1 Letter “We have made material progress at Valeant ” See excerpts below.

Valeant (VRX)

We have made material progress at Valeant since our last communication. Shortly after Steve Fraidin and I joined the board in March, the company launched a search process for a new CEO. On May 2nd, Joe Papa, formerly the Chairman and CEO of Perrigo (NYSE: PRGO), joined Valeant as its Chairman and CEO. We believe that Joe is an ideal choice for Valeant as he has extensive senior leadership experience in all aspects of the pharmaceutical industry, a strong reputation for integrity, and an excellent track record at Perrigo as reflected by the company’s 24% compounded annual return to shareholders during his tenure. Joe is passionate about the opportunity for value creation at Valeant, and we are excited to have him on board.

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Valeant filed its 10-K as expected on April 29th , eliminating any potential default under its existing credit agreements. Other than the previously reported $58 million revenue restatement from Q4 2014, there were no other restatements required in the company’s audited statements. As this was likely one of the most carefully audited financial statements ever, this should serve to comfort investors as to the integrity of the company’s financial statements. Valeant will have a largely new board slate for the upcoming annual meeting in June. Two of the company’s legacy directors will remain on the board – Bob Power and Bob Ingram, the company’s former Chairman. Over the past six weeks, the current board led by Bob Ingram has worked very effectively despite difficult circumstances. We are extremely appreciative of the board’s hard work and commitment to the company, and for the two Bobs’ willingness to continue to serve going forward.

The new board of Valeant will be comprised of CEO Joe Papa, Bob Ingram and Bob Power, the four directors who joined in March – Tom Ross, Fred Eshelman, Steve Fraidin and myself – Rob Hale, a representative of ValueAct, and three new directors who will join at the annual meeting. The new board will have ample shareholder representation, substantial executive level pharmaceutical industry expertise, and accounting expertise, as well as a practicing dermatologist.


There is much work to do at Valeant, which, among other issues, includes restoring the dermatology business to growth while working out transition issues with its new Walgreens distribution arrangement, accelerating the growth of Salix, Valeant’s gastrointestinal business, and reducing the company’s debt through free cash flow generation and the potential sale of noncore assets. We believe that Valeant has some of the best and most durable assets in the pharmaceutical industry, which do not require aggressive pricing in order to generate growth and substantial free cash flow. It will take time for Valeant to regain its stakeholders’ trust. We believe that this will occur over time as the company delivers several new quarters of results and continues to fulfill its commitments to shareholders, patients, doctors, and the community at large. Over time under Joe’s leadership, we expect the market to rerate Valeant to a substantially higher valuation reflective of its underlying business.

Ackman Q1 Letter – Organizational

Organizational Update Bill Doyle originally joined Pershing Square on a part-time basis as a Senior Advisor in September 2013. At that time he was still actively involved with several of his venture portfolio companies, most notably as Chairman of Novocure, a privately held cancer therapy company 11 that treats Glioblastoma, a cancer of the brain. In October 2014, Bill became an official member of the investment team. A year later, on October 2, 2015, Novocure completed its public offering. Bill has recently assumed the Executive Chairman role at Novocure. The demands of overseeing Novocure and managing its relationship with its shareholders and other stakeholders have made it infeasible for Bill to continue as a member of the investment team. As a result, Bill will be leaving Pershing Square Capital Management and, in addition to Novocure, will be working part-time at Table Management, an entity which oversees private investments for my family.

Ackman Q1 Letter – Full text below.

Pershing-Square-1Q2016-Investor-Letter_May-11-2016_PSH (1)

Ackman Q1 Letter