OT: Valeant

[jmc11201]

Curious whether anyone here has an opinion on this company, which is the poster-child for pharmaceutical companies behaving badly (and I think Valeant is an outlier within the industry): Acquire companies, jack up prices on their products, cutting R&D, aggressive distribution, etc. Stock has imploded and they have a ton of debt, putting future viability of the business in jeopardy.

Anyone have any thoughts on these guys either as investors, employees, doctors, curious onlookers? I've found it to be a fascinating story to follow.

 

[oldman87]

Healthcare and profit, perfect together.

 

[jmc11201]

Healthcare and profit, perfect together.

That is what I think is so interesting about this.

Despite how easy it is to be cynical about everything, most pharma companies behave within the bounds of some social contract which says 'I invest in R&D to try and develop new therapies, and in return, I get patent protection, pricing power, and large profits'. I get that they don't always behave altruistically and push the bounds, but on balance, I do think the profit motive has helped create new therapies that help people (immune-oncology drugs, Hepatitis C cures...and many mediocre drugs as well).

Valeant broke that social contract and was largely focused on low-value drugs, no R&D, and was seeking to maximize price. None of these companies are saints, but Valeant was really in its own category.

 

[T2Kplus10]

That is what I think is so interesting about this.

Despite how easy it is to be cynical about everything, most pharma companies behave within the bounds of some social contract which says 'I invest in R&D to try and develop new therapies, and in return, I get patent protection, pricing power, and large profits'. I get that they don't always behave altruistically and push the bounds, but on balance, I do think the profit motive has helped create new therapies that help people (immune-oncology drugs, Hepatitis C cures...and many mediocre drugs as well).

Valeant broke that social contract and was largely focused on low-value drugs, no R&D, and was seeking to maximize price. None of these companies are saints, but Valeant was really in its own category.

Valeant has a unique business model as already described. In a lot of ways, and they are a VC company masquerading as a pharma company. There are tons of changes going on over there now, so it will be interesting to see what happens after the dust settles.

 

[LevaosLectures]

Curious whether anyone here has an opinion on this company, which is the poster-child for pharmaceutical companies behaving badly (and I think Valeant is an outlier within the industry): Acquire companies, jack up prices on their products, cutting R&D, aggressive distribution, etc. Stock has imploded and they have a ton of debt, putting future viability of the business in jeopardy.

Anyone have any thoughts on these guys either as investors, employees, doctors, curious onlookers? I've found it to be a fascinating story to follow.

I have a friend who is a pretty high level executive in Bridgewater. He's brought me to many awesome sporting events with company tickets. Thus, I wholly approve of their evil capitalist exploitation.

In all seriousness they have to adapt to a new business model with more R and D now. Stock price will not rebound until they prove they can do it.

 

[RU2055]

Generics like Valeant, Teva, Actavis, Mylan, etc are all about profiting from the hard work of others. They are corporate parasites.

 

[FRA10Thunderbolt]

Valeant in my opinion is a buy here. My time frame is 24-36mo. Make no mistake about it this is a speculative issue but I believe the upside is greater than the downside. First lets start with the negatives. 30 billion of debt, manageable but their could be negative surprises. Pricing of their drugs is going to be under vendor scrutiny and government scrutiny. Legacy issues left over from old management that will be dealt with for several quarters.
Now the positives- The have a pipeline of real medications that are already on the market and several that are in clinical trials. This is a real company. They have approx. 10 billion in revenue although there might be pressure on that number. They have new management who are going to be focused on transparency, paying down debt and selling non core assets.
Valeant has been hammered in price but that is when you want to buy. I bought 300 shares @24.5 and will reevaluate 1 year from now. It is going to go up and down so the fact that today it is at 22.5 does not bother me one bit. I am in for the long term. If market takes a dump and vrx goes to 18 I will buy more. If vrx reports good news and goes to 30 I will hold my current position. In anycase I think vrx is a buy at this level and if you can be patient you will probably be rewarded. JMO.

 

[jmc11201]

Valeant in my opinion is a buy here. My time frame is 24-36mo. Make no mistake about it this is a speculative issue but I believe the upside is greater than the downside. First lets start with the negatives. 30 billion of debt, manageable but their could be negative surprises. Pricing of their drugs is going to be under vendor scrutiny and government scrutiny. Legacy issues left over from old management that will be dealt with for several quarters.
Now the positives- The have a pipeline of real medications that are already on the market and several that are in clinical trials. This is a real company. They have approx. 10 billion in revenue although there might be pressure on that number. They have new management who are going to be focused on transparency, paying down debt and selling non core assets.
Valeant has been hammered in price but that is when you want to buy. I bought 300 shares @24.5 and will reevaluate 1 year from now. It is going to go up and down so the fact that today it is at 22.5 does not bother me one bit. I am in for the long term. If market takes a dump and vrx goes to 18 I will buy more. If vrx reports good news and goes to 30 I will hold my current position. In anycase I think vrx is a buy at this level and if you can be patient you will probably be rewarded. JMO.

I think the company is not that cheap (despite the massive stock decline). Company trades around 8x enterprise value (debt + market cap/Earnings)...not that different than a number of other pharma names with more differentiated products and pipelines. Gilead is currently 6x.

Seems like the company was a massively inflated balloon, driven by acquisitions, cost cutting, inflated prices, and every other trick they could do to maximize near term profit. Not that everyone knows their game, we see the air getting let out of the balloon and don't really know what the value of the business is when everyone is watching them like a hawk. Most of their products are mediocre, so to the extent their is a substitute product, it would probably be easier for doctors to prescribe something else. We also haven't seen the wave of lawsuits that will certainly arrive (including Insurance Fraud likely via Philidor) and with the R&D cuts, I'm not convinced that there is enough in the pipeline to generate any real growth. On top of that, you have $30 Billion of debt that paid for acquisitions that aren't worth what Valeant paid if they can't push price aggressively on the acquired products.

I think it will take time before this story totally plays out, but I do think bankruptcy is a possible outcome here (I'd say 40% chance).

 

[FRA10Thunderbolt]

I think the company is not that cheap (despite the massive stock decline). Company trades around 8x enterprise value (debt + market cap/Earnings)...not that different than a number of other pharma names with more differentiated products and pipelines. Gilead is currently 6x.

Seems like the company was a massively inflated balloon, driven by acquisitions, cost cutting, inflated prices, and every other trick they could do to maximize near term profit. Not that everyone knows their game, we see the air getting let out of the balloon and don't really know what the value of the business is when everyone is watching them like a hawk. Most of their products are mediocre, so to the extent their is a substitute product, it would probably be easier for doctors to prescribe something else. We also haven't seen the wave of lawsuits that will certainly arrive (including Insurance Fraud likely via Philidor) and with the R&D cuts, I'm not convinced that there is enough in the pipeline to generate any real growth. On top of that, you have $30 Billion of debt that paid for acquisitions that aren't worth what Valeant paid if they can't push price aggressively on the acquired products.

I think it will take time before this story totally plays out, but I do think bankruptcy is a possible outcome here (I'd say 40% chance).

I agree with many of your comments that is why I said this is a speculative stock. In business, everything is negotiable. Debt is negotiable, government fines are negotiable, business sales are negoatiable and so on and so forth. Valeant owns Bausch and Lomb. plus they have another bunch of medicines that are profitable. It will take some time but I think the going concern value is more than the sum of the parts. That does not mean that they can't sell some non core businesses. No doubt valeant has issues but nothing that I do not think they can overcome in time. As always buyer beware and do your own due diligence.
*Past performance is not guarantee of future results. Investments are not insured! : )

 

[RU Cheese]

Theyve had accounting issues, restated and delayed publishing financials, and flirted w defaults. Stay away.

 

[Doteman]

Day traded it a few times, made a few bucks and moved on, but it scares the hell out of me, I'm glad I'm out of it for now, but if it drops a little lower I'm gonna take another look.

 

[TheFishRU]

As a physician, I have a Valeant rep come in every so often. The products that I use by them have worked well thus far. The issue I had with them was the pharmacy company that they essentially made us use to write prescriptions (Philidor).

Now, it's not to say they made us send prescriptions to them, but they offered patients with commercial insurances "no copay" on medications so of course that was enticing (would cost them significantly more through regular pharmacy's). What we didn't know at the time was that they essentially owned and operated Philidor. That's considered shady business and it ultimately blew up in their faces. They've since partnered with Walgreens and have similar low copay plans in place

I know they underwent a massive layoff recently (my rep was saved) so I'm sure that speaks volumes in itself regarding how well they're doing. They pump alot of money into advertising and it's helped them. Whatever investment strategy you want to employ, they're just like any other pharmaceutical manufacturer in this country. Draw your own conclusions...

 

[LotusAggressor_rivals]

The only difference between this company and drug dealers on the street are MBAs.

 

[rutgersguy1_rivals]

I think the company is not that cheap (despite the massive stock decline). Company trades around 8x enterprise value (debt + market cap/Earnings)...not that different than a number of other pharma names with more differentiated products and pipelines. Gilead is currently 6x.

Seems like the company was a massively inflated balloon, driven by acquisitions, cost cutting, inflated prices, and every other trick they could do to maximize near term profit. Not that everyone knows their game, we see the air getting let out of the balloon and don't really know what the value of the business is when everyone is watching them like a hawk. Most of their products are mediocre, so to the extent their is a substitute product, it would probably be easier for doctors to prescribe something else. We also haven't seen the wave of lawsuits that will certainly arrive (including Insurance Fraud likely via Philidor) and with the R&D cuts, I'm not convinced that there is enough in the pipeline to generate any real growth. On top of that, you have $30 Billion of debt that paid for acquisitions that aren't worth what Valeant paid if they can't push price aggressively on the acquired products.

I think it will take time before this story totally plays out, but I do think bankruptcy is a possible outcome here (I'd say 40% chance).

Completely agree with all this and the comment about this being a speculative stock.

I like getting into beaten up stocks from time to time for trades but that's provided that I think the company is sound fundamentally to begin with. The reasons you stated above are reasons I don't see that in this case and wouldn't touch this one myself. I don't see this as a Merck-Vioxx, Target-Credit Theft, BP-Oil Spill, etc..where there was tons of financial/litigation headline risk but in the end the business models/businesses were sound fundamentally and if you had some guts to average in it was possible to get a nice return. Valeant doesn't seem like a business model to me as much as it does a "business scheme" and now that scheme has been exposed for what it is so what's there left to fall back on? IMO not much.

So I'm sure there could be some gyrations in the stock where you could make some money if you're nimble enough but from one day to the next who knows what news could come out. Speculative stock for sure IMO.

 

[Upstream]

As a physician, I have a Valeant rep come in every so often. [. . . ] they're just like any other pharmaceutical manufacturer in this country. Draw your own conclusions...

Is your claim that they are just like any other pharmaceutical manufacturer based on your interaction with sales reps? Or is it based on knowledge of Valeant's research, acquisition, and pricing strategies?

If it is the first, then all you really know is that Valeant reps seem similar to reps from other companies. If it is the second, then either the wrong picture of Valeant has been painted in public perception, or you have a dismal view of the entire pharmaceutical industry.

 

[ru75]

What gets me is all the new drugs that are adaptions of old drugs with a big new cost. If you have private insurance with a big deductible, or Medicare, you often can't afford the new drugs. But, if you live in the right state, Medicaid allows you to get the drug with a $4 copay (or other low $ amount). Things are not sustainable.

 

[T2Kplus10]

What gets me is all the new drugs that are adaptions of old drugs with a big new cost. If you have private insurance with a big deductible, or Medicare, you often can't afford the new drugs. But, if you live in the right state, Medicaid allows you to get the drug with a $4 copay (or other low $ amount). Things are not sustainable.

88% of all drug usage is via low cost generics. Also, drug use only accounts for 10% or so of total health care cost. And it directly lowers the cost of the other 90% by curing problems or preventing higher cost needs and procedures. So let's all keep things in the proper perspective.

 

[rurahrah000]

88% of all drug usage is via low cost generics. Also, drug use only accounts for 10% or so of total health care cost. And it directly lowers the cost of the other 90% by curing problems or preventing higher cost needs and procedures. So let's all keep things in the proper perspective.

Where did you get the 10% from. I have always heard much higher estimates

 

[T2Kplus10]

Where did you get the 10% from. I have always heard much higher estimates

Too numerous sources to name - government (like CMS and GAO) and independent (like Kaiser and IMS). Here are the first two that came up on Google:

For a pie chart:
http://healthcare-economist.com/2014/12/03/us-health-care-spending-in-2013/

For total dollars spent:
http://www.forbes.com/sites/danmunr...care-spending-hits-3-8-trillion/#62522552313d

These cite 9-10% of HC are for pharmaceuticals. I think the current portion may be a tiny bit higher (~11%). But this is what it is. And once again, drugs routinely lower other HC costs, so overall ROI needs to be considered. Take the recent breakthrough Hep C drugs that have a cure rate of 90-95%. These drugs cost $80-$90K, but avoid people needing liver transplants which cost well over $500K. So once again, you need to think about the bigger picture when assessing the value of drugs.

 

[RUfromSoCal?]

Valeant never invented or discovered a damn thing. they found a loophole in the system and exploited it. Screw 'em.

 

[RRRRUUUU]

Net debt to ebitda is like 6x on street numbers that are still too high. Maybe you get a short term pop but I think there's a signifant probability that the stock is worth $0. Just my opinion.

 

[ru75]

88% of all drug usage is via low cost generics. Also, drug use only accounts for 10% or so of total health care cost. And it directly lowers the cost of the other 90% by curing problems or preventing higher cost needs and procedures. So let's all keep things in the proper perspective.

New drugs are not generic.

 

[T2Kplus10]

New drugs are not generic.

Not sure what you are talking about? Please explain. My post is accurate.

 

[ru75]

"In addition to new drugs arriving with hefty price tags, the cost of pharmaceutical agents that are already commercially available keeps rising — and in some cases, quite significantly. One of the more dramatic price hikes has been for imatinib (Gleevec, Novartis), which was developed to treat chronic myelogenous leukemia (CML) and initially offered, in 2001, for about $30,000 per year. Imatinib has now tripled in price, retailing for about $90,000. In the meantime, however, it has become the bestselling drug for Novartis, generating revenue of $4.7 billion in 2012."

 

[T2Kplus10]

"In addition to new drugs arriving with hefty price tags, the cost of pharmaceutical agents that are already commercially available keeps rising — and in some cases, quite significantly. One of the more dramatic price hikes has been for imatinib (Gleevec, Novartis), which was developed to treat chronic myelogenous leukemia (CML) and initially offered, in 2001, for about $30,000 per year. Imatinib has now tripled in price, retailing for about $90,000. In the meantime, however, it has become the bestselling drug for Novartis, generating revenue of $4.7 billion in 2012."

Are you still talking to me? This post has nothing to do with my post - apples and oranges. What point are you trying to make?

 

[czxqa]

The only difference between this company and drug dealers on the street are MBAs.

Well, that and Valeant's products aren't fun...

 

[ru75]

Are you still talking to me? This post has nothing to do with my post - apples and oranges. What point are you trying to make?

not arguing with you, just opining that the cost of new drugs is out of control

 

[T2Kplus10]

not arguing with you, just opining that the cost of new drugs is out of control

Yes, new drugs are costly (but they only represent 12% of all Rx volume). But remember the ROI and how some very expense products prevent even more costly issues/operations down the road.

 

[ru75]

Yes, new drugs are costly (but they only represent 12% of all Rx volume). But remember the ROI and how some very expense products prevent even more costly issues/operations down the road.

true, but above $30,000 a year for some is cray!

 

[NBKnight]

true, but above $30,000 a year for some is cray!

How much does an extended stay in a hospital cost?

 

[Randal7]

Good thread.

Firstly -- the poster above who said that prescription drug spend is 10 percent of total medical spend is absolutely correct. Over the last 50 years prescription drug spend has remained within the range of 10-14% of total medical spend. The real killer cost in medical care is medically unnecessary procedures and complications from medical services rendered. That's another topic for another day.

As for Valeant -- my opinion on that company is they were a companion casualty with Turing. Shrekli was unapologetic about their scheme of taking generic drugs, tightly controlling distribution, and then jacking up the price -- and Pearson was unapologetic about Valeant not investing in R&D, raising prices quarterly, and being a marketing and sales machine. There was alot of scorn but it was sort of just a culmination of awful timing. Consider that the maker of Botox...BOTOX!... conducted a smear campaign for the ages when valeant tried to acquire allergan and successfully staved that off as a result. When the maker of Botox has the high ground you knew you got F-ed.

As far as investing goes, I think the stock will come back. As someone above noted, they've got some nice products. Jublia, diastat, and the Bausch and Lomb portfolio is probably worth the market cap alone. And yea they have some real debt issues. And yeah they were using a specialty pharmacy illegally. And yea the newspapers hate them -- but these marketed products are patented annuities. I think the consumer willingness to pay on most of their products is fairly high. They need to fix their distribution and their reimbursement hub -- but They'll be OK.

 

[FRA10Thunderbolt]

Barring any more bad news it looks as though valeant is trying to form a base here. Still plenty of risk short term but look for the action on down days. If it falls a lot on down days we may have further to go on the downside, if it is only mildly down or even up on market down days then I think the base is starting to form. We have a few more quarters for this to begin a meaningful advance but I still like valeant and will buy more once the base has been tested a few times. My time frame is 3-5 years.
BTW Bill Ackman still owns a huge position in this company. I think he has no choice but to see this thing through. If the company gets into serious debt repayment trouble a deal will be struck. One scenario is Ackman could finance a debt issue to the company and defer interest 3 years - 5 years. There are hundreds of scenarios that can pan out but I do not think bankruptcy is going to happen. Do your own due diligence.

 

[ru75]

How much does an extended stay in a hospital cost?

If that was not a rhetorical question (nuance is in these days), it depends on diagnosis, insurance, treatment...Medicare is on DRG (diagnosis related group) payment based on global fee for diagnosis and length of stay (hospitals can lose money if too many tests, drugs, etc., and too many days). An OP cardiac cath on a healthy guy with no need for stents might be around $15-20K

 

[Randal7]

Every product value proposition in pharma, biotech, med device has 2 components -- there are cost offset arguments (less hospitalizations, less morbidity, less readmissions, etc) and there are humanistic arguments (quality of life, patient reported outcomes, etc). And then there are combinations -- outcomes like quality adjusted life years.

So in that value proposition a pharma company is capturing all the offsets and the humanistic benefits, inclusive of hospital stay. What the industry is struggling with now is two pronged value assessment challenge:

1) for the cost offsets, the plan that makes the investment MAY NOT be the same company that reeps the return. Most patients are only on a plan for 2 years. Therefore, plan pays for an expensive drug and then patient goes to a different plan and that other company reeps the benefit of that investment. You hope for a heterogenous population (you'll get a patient back with the same characteristics for every one you lose) but that's not the case in rare disease! We need to create some kind of voucher system to protect against this and eliminate this objection

2) for the humanistic benefits, it's difficult for us to assign a value to a duration of quality life -- never mind an actual human life! We are one of the only countries in the world that resects glioblastoma (brain tumor) twice in one life -- despite almost 100 percent assurance that the tumor will recur. We still apply American exceptionalism to our medicine and demand every drug even when it's a lost battle. We've labeled these tough calls "death panels" and they are highly politicized. The president established a value and outcomes team to look at these kinds of things and to date no one has been appointed to it. It's highly contentious.

Every other country in the world is on their 2nd and 3rd round of value assessment frameworks and we still live in the Wild West of pharmaceutical marketing. For better or worse. To turn it back toward Valeant, they harnessed the system and exploited it for all it was worth

 

[jmc11201]

Every product value proposition in pharma, biotech, med device has 2 components -- there are cost offset arguments (less hospitalizations, less morbidity, less readmissions, etc) and there are humanistic arguments (quality of life, patient reported outcomes, etc). And then there are combinations -- outcomes like quality adjusted life years.

So in that value proposition a pharma company is capturing all the offsets and the humanistic benefits, inclusive of hospital stay. What the industry is struggling with now is two pronged value assessment challenge:

1) for the cost offsets, the plan that makes the investment MAY NOT be the same company that reeps the return. Most patients are only on a plan for 2 years. Therefore, plan pays for an expensive drug and then patient goes to a different plan and that other company reeps the benefit of that investment. You hope for a heterogenous population (you'll get a patient back with the same characteristics for every one you lose) but that's not the case in rare disease! We need to create some kind of voucher system to protect against this and eliminate this objection

2) for the humanistic benefits, it's difficult for us to assign a value to a duration of quality life -- never mind an actual human life! We are one of the only countries in the world that resects glioblastoma (brain tumor) twice in one life -- despite almost 100 percent assurance that the tumor will recur. We still apply American exceptionalism to our medicine and demand every drug even when it's a lost battle. We've labeled these tough calls "death panels" and they are highly politicized. The president established a value and outcomes team to look at these kinds of things and to date no one has been appointed to it. It's highly contentious.

Every other country in the world is on their 2nd and 3rd round of value assessment frameworks and we still live in the Wild West of pharmaceutical marketing. For better or worse. To turn it back toward Valeant, they harnessed the system and exploited it for all it was worth

Good stuff. On the cost offset argument, I definitely hear that a lot. Every healthcare company makes the case that 'if everyone used our product, the total cost of care would be lower'. Sometimes it is true, but mostly it is self-serving. For example, if everyone took a diagnostic test to screen for xyz, and the cost to treat xyz if caught early is $1,000 vs. $20,000 if it isn't caught early...well you could argue that the test costing $18,000 saves money. Of course the catch is if 1 in every 1,000 people has xyz and they all take the test, you end up spending 1,000 x $18,000 = $18,000,000 to catch one case of xyz and save money on that one patient.

For Gilead and their Hepatitis C drug that has garnered a ton of negative attention, the reality is that it is a new and much better standard of care, it is less expensive than alternative treatments, it is highly efficacious (over 95%), and the costs highlighted aren't even the costs. Initially it was $84,000 list price for a 12 week treatment cycle...$1,000 per day...but the price negotiated with insurers is actually much less than that and now they can treat earlier/less severe cases for much shorter treatment cycles (6-8 weeks). In that case, the drug is actually reasonable value.

Then you get to Jublia, which cures ~15% of toe-nail fungus cases...not a dissimilar percentage vs. Vicks Vapo-Rub. Yet Valeant charges ~$8,000 for a treatment cycle. Who in their right minds would pay that? Well..no one. But, due to their owned distributor/specialty pharmacy Philidor, they were able to push prescriptions out, and let Philidor work the system to try and get reimbursement wherever they could. This is not a value-add drug, and the natural market for it (i.e. what informed consumers would pay for the drug) is very small at $8,000, or would require a much lower cost if they want to sell any. I suspect that they will be forced to drop the price very considerably to generate business. Jublia is typical of a Valeant product/strategy, and I think as the air comes out of this over-time, they just won't be able to earn enough to meet their debt obligations (unless, as a poster above speculates, Ackman steps in...although with the amount he has already lost on this, I start to wonder how much deeper his pockets are).

 

[Randal7]

Good stuff. On the cost offset argument, I definitely hear that a lot. Every healthcare company makes the case that 'if everyone used our product, the total cost of care would be lower'. Sometimes it is true, but mostly it is self-serving. For example, if everyone took a diagnostic test to screen for xyz, and the cost to treat xyz if caught early is $1,000 vs. $20,000 if it isn't caught early...well you could argue that the test costing $18,000 saves money. Of course the catch is if 1 in every 1,000 people has xyz and they all take the test, you end up spending 1,000 x $18,000 = $18,000,000 to catch one case of xyz and save money on that one patient.

For Gilead and their Hepatitis C drug that has garnered a ton of negative attention, the reality is that it is a new and much better standard of care, it is less expensive than alternative treatments, it is highly efficacious (over 95%), and the costs highlighted aren't even the costs. Initially it was $84,000 list price for a 12 week treatment cycle...$1,000 per day...but the price negotiated with insurers is actually much less than that and now they can treat earlier/less severe cases for much shorter treatment cycles (6-8 weeks). In that case, the drug is actually reasonable value.

Then you get to Jublia, which cures ~15% of toe-nail fungus cases...not a dissimilar percentage vs. Vicks Vapo-Rub. Yet Valeant charges ~$8,000 for a treatment cycle. Who in their right minds would pay that? Well..no one. But, due to their owned distributor/specialty pharmacy Philidor, they were able to push prescriptions out, and let Philidor work the system to try and get reimbursement wherever they could. This is not a value-add drug, and the natural market for it (i.e. what informed consumers would pay for the drug) is very small at $8,000, or would require a much lower cost if they want to sell any. I suspect that they will be forced to drop the price very considerably to generate business. Jublia is typical of a Valeant product/strategy, and I think as the air comes out of this over-time, they just won't be able to earn enough to meet their debt obligations (unless, as a poster above speculates, Ackman steps in...although with the amount he has already lost on this, I start to wonder how much deeper his pockets are).

All excellent points. You are absolutely correct -- a toenail fungus drug going for 8 grand is never going to be paid out of pocket by the patient. In years past the patient may only see a small copay (25 bucks) but now insurers are passing more expenses onto the patient. And they are tiering with the requirement that the physician completes a prior authorization before you get the product. Unless they are very aggressive, this is going to hurt Valeant and a brand like jublia. That may hurt all of valeants "vanity" brands. They'll need to consider whether they want to play by the same rules as industry -- negotiate some outcomes based contracts with payers (for example, if we cure 30% of toenail fungus, the payer gets X rebate, if we cure 50% payer gets Y, etc). They know they can't keep raising prices -- they'll need to get creative

 

[chase07470]

I'm accumulating Valiant shares. I understand the risks but think it generates too much cash, has identifiable areas of the business that can be made more profitable and have real assets worth real money that they can sell to pay down debt, which makes bankruptcy unlikely. The big question is what are the assets they are going to sell, worth? The sooner they start establishing that by actually selling something, the sooner the market will better understand the potential market for all their assets and what the sum may be worth. In short, I think the market is undervaluing the sum of their assets, that there is a market for what they are selling and that the price will be higher than what's priced in.

I also think the new CEO low balled the numbers in his first earnings call and will start handily beating numbers starting next quarter which will also give the stock a boost every time they announce.

Beyond that, I know very little about the company so don't ask me why I think what I think. It's just a feel for the situation and what I'm feeling is overdone negativity with a big bounce looming on positive news.

 

[jmc11201]

I'm accumulating Valiant shares. I understand the risks but think it generates too much cash, has identifiable areas of the business that can be made more profitable and have real assets worth real money that they can sell to pay down debt, which makes bankruptcy unlikely. The big question is what are the assets they are going to sell, worth? The sooner they start establishing that by actually selling something, the sooner the market will better understand the potential market for all their assets and what the sum may be worth. In short, I think the market is undervaluing the sum of their assets, that there is a market for what they are selling and that the price will be higher than what's priced in.

I also think the new CEO low balled the numbers in his first earnings call and will start handily beating numbers starting next quarter which will also give the stock a boost every time they announce.

Beyond that, I know very little about the company so don't ask me why I think what I think. It's just a feel for the situation and what I'm feeling is overdone negativity with a big bounce looming on positive news.

Don't do it chase. You are one of the more balanced posters around here, so I don't want to see you 'speculate' in this bag of hammers.

The company was built through acquisitions. The price gouging and aggressive distribution has destroyed value, so I would argue that the businesses they acquired (largely through debt) are worth less than what they paid. Theoretically they could sell some assets to give themselves time, but the lack of R&D investment and the fact that they are a pariah that no one wants to do business with unless needed, means that they slowly wither away and die.

Just my two cents of course and I could be wrong...but beyond the potential for a quick pop now and then, I think the long term trend is down.

 

[chase07470]

Don't do it chase. You are one of the more balanced posters around here, so I don't want to see you 'speculate' in this bag of hammers.

The company was built through acquisitions. The price gouging and aggressive distribution has destroyed value, so I would argue that the businesses they acquired (largely through debt) are worth less than what they paid. Theoretically they could sell some assets to give themselves time, but the lack of R&D investment and the fact that they are a pariah that no one wants to do business with unless needed, means that they slowly wither away and die.

Just my two cents of course and I could be wrong...but beyond the potential for a quick pop now and then, I think the long term trend is down.

Yours is the prevailing view, no doubt. I won't bet the farm on it, I have a relatively small position. I like it just under $20. Think a bounce back to $30 is inevitable no matter what happens and even if it goes to $14, a bounce from there to near $20 is certain. Minimal risk accumulating here, imo.

 

[FRA10Thunderbolt]

VRX up $1.03 today on news that it had two drugs approved by the FDA. Things looking good so far.