For those of you following this saga, here’s the latest from Bronte Capital, SIRF, and the Wall Street Journal on the wonderfulness that is Valeant Pharmaceuticals. Marvel at companies that aren’t supposed to be related that share phone numbers and web sites, at Valeant prescriptions being mailed all over the place, including plenty of states where their pharmacies were not even licensed to operate (via the simple expedient of pretending to be someone else), at these pharmacies not only trying to hide their Valeant associations, but being denied those licenses because no one can figure out who owns them at all, and at employees from Valeant physically working at said specialty pharmacies but under the aliases of comic-book superheroes, and no, I’m not making that last one up.
Valeant has released an 88-slide PowerPoint for its press conference today where it will attempt to explain all this. I expect the stock to hit the floor again like a frozen turkey, but who knows, maybe they’ve got a good explanation for why no investors were told about any of these tactics. Whether this turns out to be channel-stuffing, mail fraud, or what, it’s not what the stockholders thought that they were signing up for, and those investors should be pretty ticked off.
My own take on this is that Valeant’s entire business model – take on debt to buy other companies, strip out the R&D and do none of your own, and fund everything by steep price rises – has probably had the numbers run on it by others. Several times. You can probably get this sort of thing to work on a small scale, but can you run a big company that way? Perhaps not, unless you resort to the kinds of creatively aggressive tactics we’re seeing uncovered now. Viruses are small compared with cells, and remoras don’t grow to be the size of sharks. A free-riding organization like Valeant, similarly, probably has a size limit, and my guess is that they’ve been exceeding it for some time now.