Major Valeant shareholder Sequoia exits its stake after losses


Sequoia Fund, a major Valeant shareholder, has seen enough from the struggling drugmaker.

Ruane, Cunniff & Goldfarb, the fund’s manager and once Valeant’s biggest investor, says it exited its stake in the Canadian pharma last month after sustaining major losses.

“Valeant was our largest position to start the year and its 80% decline through June 30 badly penalized our results,” Ruane Cunniff CEO David Poppe wrote in a letter seen by Bloomberg.

Sequoia, which first picked up Valeant in 2010, has been sharing in Valeant’s hardships since last year, when a short seller piled channel-stuffing allegations on top of a drug-pricing controversy that was already weighing on the stock. Ruane Cunniff did its best to get to the bottom of claims, reaching out to former employees of Valeant-linked specialty pharmacy Philidor and even paying hundreds for information. But Valeant’s downward spiral continued, perpetuating Sequoia’s own slump.

The result? A 7.3% loss last year that spurred the retirement of CEO Robert Goldfarb, who Poppe replaced in March. And investors who claimed Sequoia recklessly took a huge stake in Valeant--which once accounted for more than 30% of its portfolio--slapped the fund with a lawsuit in January. The losses continued in the first half of this year, with the fund losing more than 13%. Without Valeant, it would have gained 2.3% through June, Bloomberg reports.

Sequoia, of course, isn’t the only one that’s been hurt by Valeant’s serious slide. Leading shareholder Bill Ackman’s Pershing Square Capital Management has been badly burned, too, prompting the activist investor to jump into the fray and join the board in an effort to set things straight.

So far, though, the stock is still bottom-feeding, in part thanks to a debt-default worries and a Walgreens distribution deal new CEO Joseph Papa has said is hurting sales. The skipper has said he’s working on correcting both, though, potentially through asset sales and a renegotiated Walgreens pact.

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Valeant employees closely involved with Philidor operations: Reuters