SEC’s Pathetic Agreement With Bausch Health Companies

Whitney Tilson’s email to investors discussing SEC’s pathetic agreement with Bausch Health Companies Inc (NYSE:BHC) (formerly Valeant); Insys documentary; Opioids, Bribery, and Wall Street; Novartis bribery settlement; Kodak.

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Q2 2020 hedge fund letters, conferences and more

SEC's Pathetic Agreement With Bausch Health Companies

1) On Friday, the U.S. Securities and Exchange Commission ("SEC") announced a totally pathetic agreement with Bausch Health (BHC), formerly Valeant Pharmaceuticals, and three of its former top executives: CEO Michael Pearson, CFO Howard Schiller, and controller Tanya R. Carro.

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In light of the massive, well-orchestrated, multiyear fraud that took place here – resulting in the stock soaring to more than $250 per share and then crashing by 97% to less than $10, costing shareholders nearly $100 billion – the $45 million penalty for Bausch Health and mere $700,000 paid by Pearson (the mastermind of the scheme) is a sick joke... especially since the executives didn't even have to admit wrongdoing! This tap (not even a slap) on the wrist is an open invitation to other fraudsters...

Insys Documentary

2) A more appropriate outcome would have been something along the lines of what happened to Insys Therapeutics, another notorious pharmaceutical company that, thanks to strong (albeit belated) regulatory action, was forced into bankruptcy, with top executives receiving jail time.

To understand the whole story – and better understand how messed up our health care system is – I highly recommend Opioids, Inc., a 53-minute documentary by PBS's Frontline and the Financial Times. Here's the associated story: Opioids, Bribery, and Wall Street: The Inside Story of a Disgraced Drugmaker.

Novartis Bribery Settlement

3) Effectively bribing doctors to prescribe high-priced drugs is rampant in the pharma industry – Insys just took it to an extreme.

We need a lot more crackdowns like this (not to mention a change in the laws so such shenanigans are banned entirely): Acting Manhattan U.S. Attorney Announces $678 Million Settlement of Fraud Lawsuit Against Novartis Pharmaceuticals Corporation for Operating Sham Speaker Programs Through Which It Paid Over $100 Million to Doctors to Unlawfully Induce Them to Prescribe Novartis Drugs.

Shares of Eastman Kodak Spike

4) Speaking of things that stink to high heaven, shares of Eastman Kodak (KODK) spiked from around $2 to a peak of $60 in two days last week after President Donald Trump announced that the federal government will loan the company $765 million to develop ingredients for generic drugs.

While the pandemic has underscored why we want to reduce our reliance on China and India – who produce the vast majority of active ingredients for our prescription drugs – it's not clear why Kodak was chosen and it's unconscionable that the news leaked out early, allowing some clever traders to make huge profits... as this article highlights: Trump taps Kodak (yes, that Kodak) to bring stability to the drug market.

And this just stinks – yet another example of corporate insiders profiting from the pandemic: Kodak CEO Got Stock Options Day Before News of Loan Sent Stock Soaring.