Valeant shares continue downward spiral
The plunge of Valeant Pharmaceuticals International shares gained speed Thursday as investors reacted to new questions and a congressional investigation targeted the embattled drugmaker.
The stock finished down more than 14% Thursday at $78.77 a share. The shares have now lost 70% of their value from a high of $262.50 on Aug. 5.
The new plummet came as David Stockman, the former Reagan administration budget director, criticized Valeant’s business model of rapid growth through mergers and acquisitions, rather than by research and development of new medications.
“This is nothing more than a giant M&A machine right out of financial engineering central from Wall Street,” Stockman said during a Thursday appearance on
Bloomberg Go. “Over the past four or five years, a company that was barely on the radar screen, maybe $500 million of sales, got to the point where it was going to be a $20 billion monster.”
Separately, activist investor William Ackman, whose Pershing Square Capital Management hedge fund is one of Valeant’s top shareholders, weighed selling the entire stake, which cost him $3.8 billion, The Wall Street Jour
nal reported. “Valeant has become toxic,” Ackman wrote in an Oct. 27 email to J. Michael Pearson, the drugmaker’s CEO, the Journal reported. “Even we are very concerned.”
Ackman instead bought $2 million in additional shares, then stressed what he characterized as Valeant’s financial strengths during a conference call with investors on Friday. Not all of the company’s major investors were as bullish.
Jana Partners, the hedge fund managed by activist investor Barry Rosenstein, held more than 1.34 million Valeant shares during this year’s second quarter — down from 4.3 million shares during last year’s fourth quarter — Securities and Exchange Commission filings show.
The hedge fund sold the remaining stake in September, the month that presidential contender and former secretary of State Hillary Clinton tweeted criticism of pharmaceutical firms that impose steep price hikes on medications.
Other shareholders appeared to be influenced by critical disclosures, including Wednesday’s announcement of the Senate Special Committee on Aging ’s new investigation of medication price hikes by the drugmaker and three other pharmaceutical firms.
The Senate panel plans to examine price increases on recently acquired off-patent drugs, along with pharmaceutical industry mergers and acquisitions that in some cases have affected the cost of such medications.
Additionally, the committee will explore the Food and Drug Administration’s role in the approval process for generic drugs and the agency’s distribution protocols.