Activist investor and one-time Valeant ($VRX) enthusiast Bill Ackman is tired of waiting for Valeant's plunging stock price to turn itself around. After a disastrous earnings and guidance announcement on Tuesday that sent shares spiraling by close to 50%, he let investors in his hedge fund know he was ready to do something about it.
Ackman's fund, Pershing Square Capital Management--which boasts a brand-new seat on Valeant's board, thanks to last week's appointment of Pershing vice chairman Steve Fraidin--is "going to take a much more proactive role at the company to protect and maximize the value of our investment," Ackman wrote in a letter to investors on Tuesday. That investment currently totals 30.7 million Valeant shares, a 9% stake in the company that makes Pershing Square its second largest investor.
The way Ackman sees it, "the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price." But "getting to those values … will require restoration of shareholder confidence in the management and governance of the company," he wrote.
Ackman's outrage comes as no surprise after the dismal state of affairs Valeant laid out Tuesday morning. After revoking its previous 2016 guidance and delaying the release of its Q4 2015 and Q1 2016 results, the Canadian drugmaker took its forecasts down dramatically, listing underperformance in several of its key businesses among a slate of problems that already included an ongoing earnings restatement; payer pressure; channel-stuffing allegations; political pushback over its drug-pricing practices; and investigations from the SEC, Congress and others.
And it's not the first time he's expressed concern over the company's leadership, either. Once a champion of Valeant CEO J. Michael Pearson--the two teamed up back in 2014 on a months-long hostile pursuit of Allergan ($AGN) that ultimately failed, and in the months that followed, Ackman went as far as calling Pearson the next Warren Buffet--Ackman expressed to Valeant director Robert Ingram last fall that if Pearson were to hide "in the bunker" over claims the company used specialty pharmacy Philidor to inflate its top line, "he can't be CEO."
As for Pearson--newly reinstated as skipper following a two-month medical leave of absence and some boardroom squabbling over his candidacy--he knows his job could be in peril. Pressed by analysts on Tuesday's conference call as to whether he was best fit to lead the company, he acknowledged that that decision was up to the board--and that the board contained representatives from both Pershing Square and fellow activist ValueAct Capital, both of which have not hesitated in the past to take matters into their own hands.
- read the letter
- read the letter
Special Report: The most influential people in biopharma today - 2016 - J. Michael Pearson - Valeant