Author Topic: Valeant  (Read 2755 times)

mrpercentage

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Valeant
« on: March 22, 2016, 06:36:48 PM »
Okay.. Im going to go out on a limb.

Valeant is the next Freeport.

Hated company backed by activist hedgefund manager that other managers want to punish.

I going to throw out a couple concessions. First, what Valeant did was detestable and will not be tolerated by the public or government. Also, the accounting practices are awful.

That said, they are changing management and they have a smart guy with a lot of money at risk doing his best to bail them out of this mess. I think he can do it. Politics does not make a business profitable and the market likes to over react. I have a $160 on Valeant that says its worth more. I love Robinhood. Right now its in the red and I don't care. Things that go red fast go green fast too. (at least sometimes they do).

Anyone want to talk about heavily indebted companies with hated managers that are going to reverse? But wait, you sold $MDLZ Bill? WTF!!! I love Cadbury chocolate bars. Love them. Sees step over and Hershey tip your hat because the sparkly purple packaging calls to me like the dark side of the force.

% out

meghan88

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Re: Valeant
« Reply #1 on: March 22, 2016, 07:11:52 PM »
I hope you're right.  They're an interesting study and they are battling no shortage of controversy, even on their minor products like Cold FX (class action suit in progress).  If I may ask, how are you playing it exactly?  Any other hated Canadian stocks like this that you're tracking?  It'll be interesting to see your updates on this one.

mrpercentage

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Re: Valeant
« Reply #2 on: March 22, 2016, 07:24:25 PM »
Not specifically Canadian but I do track hated names where sediment gets out of control. I try to put a filter on my ideas because they are constantly developing and don't want to come across as flippant through limited communication in the forums. I will be tracking Valeant though. I know its on a lot of traders minds and is plastered all over the news so I figured it deserves a spot in here.

Playing it-- I never short. Never. So I'm playing it for unexpected explosion upside when all the shorts and all the sellers are gone. It might take a few months. It may sound ridiculous for a trade to last a few months but its about being approximately right. I do not want to own it for 20 years so no large capital for me. I almost jumped into Freeport with a significant amount of money. I don't plan to do that with Valeant. Just a small bet for me and a test of judgement for the long.

financialpurgatory

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Re: Valeant
« Reply #3 on: March 22, 2016, 07:38:16 PM »
I don't have high hopes for vrx in the long run.
They add no value to their patients and their payers. None.
They buy old drugs, change the packaging, and jack up the price. Its a great thing for the market as a whole to let companies like this fail and die a horrific death.
How this company had market cap over a 100 billion just last year is baffling.

Traditional Big Pharma adds value by doing research and launching new therapies. Vrx has no research division. Research division does not pop up overnight. Even with a stellar research division, it takes close to a decade for drug to be developed, tested, and go through regulatory hoops before it can be marketed. This process also costs great deal of money. Looking at Vrx balance sheet, I am skeptical they can afford to take this route.
Generic drug companies add value by taking old meds off patent and selling them at a discount. This does not apply to Valeant.

Where and how Bill Ackman find value for customers of Vrx is unclear at best. At worst, it doesn't matter who is at the helm. This company is going to fail in the long run.

mrpercentage

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Re: Valeant
« Reply #4 on: March 22, 2016, 08:30:20 PM »
Quote
I don't have high hopes for vrx in the long run.
Neither do I really.

Quote
They add no value to their patients and their payers. None.
Right now you are right.

Quote
They buy old drugs, change the packaging, and jack up the price. Its a great thing for the market as a whole to let companies like this fail and die a horrific death.
How this company had market cap over a 100 billion just last year is baffling.
Yes the practice was detestable but they still do hold those drugs.

Quote
Traditional Big Pharma adds value by doing research and launching new therapies. Vrx has no research division. Research division does not pop up overnight.
Doesn't mean that there isn't an out of box solution.


Quote
Where and how Bill Ackman find value for customers of Vrx is unclear at best.
Almost the same thing was said about Icahn with Freeport-- granted there isnt any moral dilemmas with Freeport. When I make a comparison I am not saying that Valeant is on the same ethical standards as Freeport-- Im talking about the explosive conditions of its stock price. Companies are hated for good reasons. That doesn't mean you cant get one more puff out of the cigar like Warren Buffetts old cigar butts. If I was big money I would steer clear due to the political nature of this. Individual traders will not care. They aren't interested in the nature of the business but only the movement of its price due to current conditions.

I wont cry seeing Valeant fail, but it would bother me a little to see my $160 go to zero. I bet $160 because I don't think it will. Only time will tell if I am right. I like to put big money closer to my heart in areas I think it will be okay for 20 years.

mrpercentage

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Re: Valeant
« Reply #5 on: March 22, 2016, 10:17:16 PM »
I probably should have shown the screenshot. You can see the violent moves is the stock. Traders love violent moves or I do anyway


tooqk4u22

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Re: Valeant
« Reply #6 on: March 23, 2016, 09:38:45 AM »
Okay.. Im going to go out on a limb.

Valeant is the next Freeport.

Hated company backed by activist hedgefund manager that other managers want to punish.

But it was a loved company backed by hedgefund manager that other managers wanted in on....any company with that high investment by mostly hedgefunds is the problem.

I going to throw out a couple concessions. First, what Valeant did was detestable and will not be tolerated by the public or government. Also, the accounting practices are awful.

I don't know if it is detestable or not at least as far as raising prices, supply and demand and what not...how they did it using fraudulent pharmacies and accounting on the other hand is detestable. 

A lot of companies raise prices dramatically when they acquire products, in this case the government and insurance companies allow it....that is the problem. 

That said, they are changing management and they have a smart guy with a lot of money at risk doing his best to bail them out of this mess. I think he can do it. Politics does not make a business profitable and the market likes to over react. I have a $160 on Valeant that says its worth more. I love Robinhood. Right now its in the red and I don't care. Things that go red fast go green fast too. (at least sometimes they do).

So smart in fact that Ackman is in it at $160ish/share and has lost $4billion.  He was only smart with Valeant when he and Pearson concocted a defacto insider trading scheme that was just a hair inside of legal with a thesis that prices would continue to escalate rapidly combined with acquisitions of new products funded entirely by debt.

Anyone want to talk about heavily indebted companies with hated managers that are going to reverse? But wait, you sold $MDLZ Bill? WTF!!! I love Cadbury chocolate bars. Love them. Sees step over and Hershey tip your hat because the sparkly purple packaging calls to me like the dark side of the force.

Ackman was again so smart as to sell MDLZ, a pretty good company, to fund redemptions and/or margin calls (he said he doesn't use margin though).

This is a company that if it can't file its 10Q faces defaults on its massive debt.....IMO the reason it can't file is because its auditors are so far from being able to, or willing to, sign off on the financials.

The whole thing was a scam.  There are numerous lawsuits and investigations. 

Restated revenue and earnings guidance has been dropped and is probably still optimistic....dermatology unit relied exclusively on the scammy pharmacy and all of the products and brand name that have been around forever and have proven generics that are low cost.

There is still value to this company if they solve the default issue, but given low growth prospects for price and volume, high debt load, and pending resolutions to accounting, investigations, and lawsuits I am not sure there is any more upside to the stock than its recent rebound. 

They will have to start selling products/units to stay afloat.

nobodyspecial

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Re: Valeant
« Reply #7 on: March 23, 2016, 11:36:09 AM »
Slightly more worried about the SEC investigation.
The public/media have a good story in the ruthless drug company forcing sick people to pay $500 for a $5 pill.  The more interesting story would be why the night in hospital to take the pill costs you $20,000 - but it's hard to find a simple single villain to blame the entire US healthcare system on.

Since they are bad guy of the day, but there is no law against charging $500 for a pill you target them with the SEC/IRS etc where some investigator can score political points by attacking an easy target.

If the SEC and IRS are going to become as political as the typical public prosecutor - business is going to get tricky.

 

vivophoenix

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Re: Valeant
« Reply #8 on: March 23, 2016, 02:53:18 PM »
I don't have high hopes for vrx in the long run.
They add no value to their patients and their payers. None.
They buy old drugs, change the packaging, and jack up the price. Its a great thing for the market as a whole to let companies like this fail and die a horrific death.
How this company had market cap over a 100 billion just last year is baffling.

Traditional Big Pharma adds value by doing research and launching new therapies. Vrx has no research division. Research division does not pop up overnight. Even with a stellar research division, it takes close to a decade for drug to be developed, tested, and go through regulatory hoops before it can be marketed. This process also costs great deal of money. Looking at Vrx balance sheet, I am skeptical they can afford to take this route.
Generic drug companies add value by taking old meds off patent and selling them at a discount. This does not apply to Valeant.

Where and how Bill Ackman find value for customers of Vrx is unclear at best. At worst, it doesn't matter who is at the helm. This company is going to fail in the long run.

a research division pop sup if they decide to buy one. what do their cash reserves look like?

EarlyStart

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Re: Valeant
« Reply #9 on: March 23, 2016, 05:51:34 PM »
They're going to have to pull something out of their ass to survive without issuing new shares (diluting existing shareholders). They have 30B in debt, and over 5B is due in the next two years. Debt to Equity is >475...


That, and there's the alleged fraud. They committed an "error" that every C-average accounting student knows is incorrect. They recognized revenue when they made "sales" to a related party instead of when the customer actually bought it. Here's how it goes:

Valeant->Philidor(themselves)

$150 sale

Philidor(still Valeant)->Customer

$100 sale

Valeant recognizes $250 of revenue.



Even as far as fraud goes, its not even sophisticated or impressive. Earlier this month they blamed a $600 million overstatement of earnings on a typo. LOL. Their non-GAAP earnings numbers are an ongoing travesty:

"Of the $8.2 billion in cash earnings that Valeant has reported since the beginning of 2011, $6.3 billion, or 76%, has come from excluding acquisition related costs."
-Fortune


To me it doesn't look like they have sub par accountants. They're committing fraud. That said, I don't know what the run off value would be of all their drugs, and a $160 bet isn't that big of a deal. Life will go on either way. Good luck.