CEO retires at investment firm hurt by Valeant stake

NEW YORK— The CEO of a firm with the largest stake in troubled Valeant Pharmaceuticals is retiring after punishing losses due to that investment.

Although Bill Ackman’s Pershing Square Capital Management has been the public face of Valeant investor pain, Ruane, Cunniff & Goldfarb holds a 10.4-per-cent stake in the drug company, compared with Pershing’s 9 per cent.

That has translated into significant financial losses for Ruane, Cunniff & Goldfarb, where Robert Goldfarb has served as chief executive.

The firm’s flagship Sequoia Fund has tumbled 28 per cent in the past year as Valeant stumbled.

Once a Wall Street star, the Canadian drug company is now besieged by federal probes into its practice of buying companies that own older drugs, then jacking up the prices. Valeant also faces Securities and Exchange Commission investigations, including an inquiry into accounting and inventory issues at Salix Pharmaceutical, a drugmaker Valeant bought for $11 billion last year.

Last month, Valeant said it would delay filing its 2015 annual report with regulators while it sorts out its former relationship with the mailorder pharmacy Philidor.

On Monday, Valeant announced the departure of longtime CEO Michael Pearson.

Goldfarb has been the co-manager of the Sequoia Fund, which has had an outstanding track record. According to the company, over 45 years through 2015, it has had a return of14 per cent per year. Valeant, however, has taken its toll. “While we have beaten the market over the past decade, through the end of 2015, our investment in Valeant has diminished a record that we have built over two generations and in which we take great pride,” Ruane, Cunniff & Goldfarb said in a letter this week.

Those same conversations have been taking place at Pershing Square Capital Management, though Ackman has adamantly defended the investment in Valeant.

This week, Pershing reported that its firm had declines of 25.2 per cent since the beginning of the year. On Monday, Ackman took a seat on Valeant’s board.