One sure thing about Valeant: No happily ever after for the Ackman-Pearson bromance

It seems like just yesterday, activist investor Bill Ackman and Valeant ($VRX) CEO J. Michael Pearson were joining forces in a hostile bid to swallow Allergan. But oh, how times have changed.

Let alone that Allergan ($AGN) has been bought by Actavis, which then changed its name and agreed to a Pfizer megamerger--we'll save that recap for another time. Much has also ostensibly changed between Ackman and Pearson. So much so, it seems, that it may be time to close the book on one of pharma's best-loved bromances.

But before we do, let's take a trip down memory lane.

Ackman reportedly agreed to work with Valeant to pull off a buyout after a Pershing Square employee introduced him to Pearson in February 2014. Pearson--then on an M&A spree to bolster its healthcare and eyecare portfolios--expressed interest in Allergan, and from there, Ackman got to work buying stock. Eventually, he combined that with over-the-counter call options to quietly amass a 9.7% stake in the Irvine, CA-based drugmaker. In April, he and Pearson took the bid public. It was the first combined effort between a wannabe buyer and a major shareholder of its target.

Bill Ackman

Fast forward 7 months, and Valeant and Ackman were mourning a defeat. Well, at least Valeant was--Ackman, still toting that hefty Allergan stake, netted a $2.6 billion profit on the affair, as the takeover battle and eventual Actavis victory sent Allergan's shares soaring.

Ackman, though--who spent a sizeable portion of his 2014 talking up Valeant and his business model--didn't just take the money and run. Instead, he put it where his mouth was, picking up a $3.3 billion stake in the Canadian drugmaker to become its fifth-largest shareholder.

Valeant didn't stay down for long, returning to its buying ways with moves that put its share price back on the upswing. That May, Ackman touted Valeant as an early-stage Berkshire Hathaway, crooning about its ability to keep the deal train chugging along.

And it did once again in August, picking up Sprout--the maker of hyper-controversial female libido pill Addyi. Ackman had personally invested in the North Carolina company, taking part in its latest round of fundraising, The Wall Street Journal reported at the time--and when it came time for Sprout's management team to weigh potential buyout offers, Ackman gave Pearson a "glowing reference." Meanwhile, Ackman and other investors in the round scored a cash payout of about twice their initial investment, plus a share of profits.

But the good times wouldn't last. The spotlight soon turned to Valeant, whose price-hike strategy landed it under a barrage of questions from Congress. The company's stock took a beating on those pricing worries, as did Ackman's fund, which recorded a 12.5% loss in September. And in October, a short seller accused the company of using its specialty pharmacy relationships to inflate its top line, which hit both Valeant and Ackman's Pershing Square hard.

Still, though, Ackman stood by Pearson--and his bet on Valeant. Cracks appeared in the relationship--he "would have taken a different approach" to addressing the channel-stuffing allegations, he wrote in a November email to Pearson--but he expressed confidence in Pearson's leadership, noting that "you and the board should not interpret this as a negative reflection on my view of you as the CEO of the company." Later that month, he raised his Valeant stake once again, hitting the 9.9% threshold--a move that piled the hurt on a disastrous year for his fund.

But as more questions and more blunders continued to roll in--and the stock price continued to languish--Ackman lost patience. "Either management will restore confidence in the reputation of the company with the public and the investment community or they won't," he said in early March. "If they can't then one of two things will happen--new management will be bought in or the business will be sold."

And just this week--after a 51% plunge in Valeant's share price cost him billions, spurring him to vow action--he seemed to help make a push for the "new management" option. Valeant unveiled news of a replacement CEO search--as well as Ackman's appointment to the company's board--at the same time Monday.

What comes next for embattled Valeant, of course, remains to be seen. The two men attempted to answer that question at a town hall Monday, according to Bloomberg, tossing out the possibility of a partial sale of Bausch & Lomb and reassuring employees that widespread layoffs weren't on the horizon. But it looks as if it'll be Ackman, and not Pearson, who's on board to make it happen. -- Carly Helfand (email | Twitter)

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