Valeant's ($VRX) price hiking battle wounds are bleeding onto its second largest investor. Months after U.S. lawmakers began targeting the Canadian pharma over dramatic price increases, legislators are asking longtime Valeant ally Bill Ackman and his hedge fund for information about the company.
The U.S. Senate Special Committee on Aging, led by Sen. Susan Collins (R-ME) and Sen. Claire McCaskill (D-MO), is probing Ackman's Pershing Square about Valeant's price hikes. Ackman last week told investors that he would cooperate with the probe but did not offer up any details about the information sought by lawmakers. Still, "(t)he request is directly related to Valeant," a person familiar with the matter told Reuters.
The Senate probe puts more weight on Ackman's shoulders as he deals with Valeant's recent fallout. Earlier this month, the company revealed dismal 2015 earnings and a lowered 2016 guidance, sending shares down by almost 50%. Ackman told investors that he was "going to take a much more proactive role at the company to protect and maximize the value of our investment." Ackman's Pershing Square holds a 9% stake in the beleaguered pharma.
Ackman, who recently joined Valeant's board, has some ideas about how to get things back on track. Unlocking value in the company's businesses "will require restoration of shareholder confidence in the management and governance of the company," Ackman said recently. Ackman, along with the board, has pledged to find new leadership for Valeant after CEO J. Michael Pearson's hasty departure.
Reshuffling business could also help solve some of the company's problems. Valeant could spin off part of its eyecare unit Bausch & Lomb in an IPO to raise funds to pay off debt, Ackman said. The company recently revealed that it would miss regulatory filing deadlines due to accounting errors, spurring talk that it wouldn't fulfill its debt agreements.
Meanwhile, Valeant continues to face pushback from lawmakers and the government for price hikes for certain drugs. Leaders in the House Committee on Oversight and Government reform earlier this month chastised the company for withholding documents about price hikes. And the SEC and U.S. Attorney's offices in Massachusetts and New York have all subpoenaed the company for more information on dramatic price increases.
Sens. McCaskill and Collins and their price-fighting team on the U.S. Senate Special Committee on Aging are also coming down on Valeant for recent price hikes. McCaskill has repeatedly slammed the company for not cooperating with lawmakers' requests.
Valeant offered up "limited information" about revenue from large price increases on cardio drugs Isuprel and Nitropress, McCaskill said in a letter to Pearson last fall. And the company did not address McCaskill's requests for additional details, including dates and amount of specific price changes, she said. "Your failure to provide a complete response to my requests is deeply disappointing," McCaskill said at the time.
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