Yesterday I discussed the history of Valeant Pharmaceuticals, and mentioned its unsuccessful effort to acquire Allergan. Valeant never did acquire Allergan, but its effort made some fascinating law. Some of the key questions arose from the fact that Valeant was acting in concert with a hedge fund manager, Pershing Square. So closely in concert, indeed, as to raise the question whether what was going on amounted to insider trading as SEC rules understand it? Pershing Square acquired a 9.7% stake in Allergan during the period of this collaboration, and it is was willing to vote those shares in favor of ousting the company directors that were resisting the takeover attempt. Allergan responded with a lawsuit, asking that Pershing Square be enjoined from voting its shares giving the "likelihood" that this would be deemed to be insider trading. Was there such a “likelihood” and would that have supported a preliminary injunction? The U.S. District Court for the ...
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Yesterday, I wrote a few words about where Valeant stands now. I'd like to follow up today by taking a look back. Valeant was a California company that merged with Canada's Biovail in 2010. The two companies were of about equal size, and some would say the resulting company had as much of Biovail's DNA in it as Valeant's, although of course calls itself by Dad's name. And at that time, Biovail was known as a product development company, (with some pushing-the-envelope bookkeeping tricks, but let's be charitable and forget about that.) Unfortunately some of its key products, including the neurological medicine Wellbutrin, were suffering from tough competition. Pearson, in 2010, set the company on quite another course. He was more interested in acquiring other companies than developing products. Let's skip ahead. Valeant spent much of 2014 trying to buy Allergan, which failed because Allergan found another suitor, and was acquired by Actavis for $66 bi...
Valeant Pharmaceuticals has taken some hits of late. At the end of March 14, a share of VRX at the NYSE would bring you $69.04. At the end of the following day, it was worth less than half of that, just $33.51. It has lost further ground since. What happened? Management had announced disappointing earnings figures, and cautioned that its debt holders could categorize it as in default if it missed an April 30th filing deadline. A week later, the bond rater Moody's downgraded Valeant, on the grounds that its cash stockpile was inadequate to its overall indebtedness. Meanwhile, as the departure of J. Michael Pearson, the long-time CEO, approached, shareholders naturally got nervous. They were nervous, that is, because always creates a case of the nerves in someone, often in many people. They weren't nervous as a recognition of Pearson's great leadership. Indeed, he had run up a heck of a lot of debt on acquisitions, some of which at least were of dubious ...