On Tuesday morning, Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX) CEO Michael Pearson hosted a second conference call to address allegations about the company. This came after Bill Ackman, whose fund holds 21.5 million shares, said the first call was too âscripted.â
As would be expected, this call featured only about 15 minutes of prepared remarks, followed by over an hour of questions. We take a look at the three major takeaways below.
1. Blaming bad PR
Mr. Ackman has also been critical of Valeantâs communication strategy in general, claiming the company did not respond quickly enough–nor forcefully enough–to its many critics. On the call, Mr. Pearson acknowledged this problem at the company, saying that it was âa painful learning experience for me, personally.â
Both men may be right, but the shorts argue that a lack of communication isnât Valeantâs biggest problem.
2. Philidor
When Mr. Pearson opened the line up for questions, he said that he wouldnât comment on Philidor because Valeant is still investigating what happened. This certainly does not pass the smell test. Valeantâs current troubles are directly tied to Philidorâs practices, and there are many unresolved questions about the specialty pharmacy.
Remember, this investigation is not exactly an independent one. It is being led by a special board committee, and all of the major people involved are Valeant shareholders. So, in a sense, Valeant is investigating itself. No one has any doubt that the investigation will exonerate Valeant.
At the same time, Mr. Pearson said that âitâs impossible to have full knowledge of everything.â He was referring to what really happened at Philidor. Such a statement hardly inspires confidence, and ironically it came after he admitted that communication is a problem.
3. Moving on
Mr. Pearson said he wasnât ready to update any guidance numbers, saying that he would do so in December, when Valeant hosts its Investor Day. But he did say that Valeant would be replacing Philidor within 90 days, likely with multiple relationships, and will not have an option to buy any of these companies.
He also emphasized how confident he is, in part because Philidor accounted for only 7% of the companyâs revenue. Other parts of the business remain unaffected; for example, drugs from the recently acquired Salix are showing fantastic growth.
As for questions about Mr. Pearson himself, there is no question that he is staying on to see the company through this mess. And for those of you who wanted more colour from the CEO (which should be everyone who listened in on the call), youâll get to hear him speak to the U.S. Congress in December.
Until then, we still have not gotten to the bottom of all these issues, and Valeantâs stock remains far too risky for my taste.
