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Bill Ackman Apologizes for Valeant Investment Error
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In a letter addressed to shareholders, Bill Ackman, chairman of Perishing Square Holdings, Ltd stated that investing in Valeant Pharmaceuticals was a big mistake on his part.
The chairman stated that firm’s stake in Valeant was the primary driver of negative performance in 2016. The firm’s stake in Valeant resulted in a return of -19.2% in 2016.
We note that the shares of Valeant have underperformed the Zacks classified Medical-Drugs industry in the last year. The stock lost 57.3% as compared to the industry’s gain of 14.4%.
We remind investors that following a substantial decline in Valeant’s share price in the first quarter of 2016, Bill Ackman and Steve Fraidin joined the board in Mar 2016 as part of Pershing Square’s effort to stabilize the company. Thereafter, the Chief Executive Officer (CEO) of the company was replaced and Joseph C. Papa became the new CEO.
The new management took various efforts to turnaround the company but in vain. Despite significant operational progresses, share price performance continues to disappoint. As a result, earlier in the month the firm sold its remaining stake in Valeant.
Ackman further added that the highly acquisitive nature of Valeant’s business required prudent capital allocation and operational execution as well as astute management skills. Ackman admitted his mistake in judging the management of the company.
Once an acquisition giant, Valeant was caught up in various controversies in 2016-price hike of specialty drugs, erroneous financial reporting and termination of contracts with Philidor Rx Services. With its new CEO, Valeant started a rebuilding process in 2016. However, that was not enough.
The company reported fourth-quarter results which beat expectations but the guidance for 2017 was disappointing.
The guidance for 2017 poses concerns about the company’s organic growth. Valeant witnessed an improvement in sales force turnover owing to some voluntary and involuntary changes. Moreover, generic competition of key drugs will continue to impact results. On Nov 8, 2016, Moody’s Investors Service downgraded the company’s credit rating from B2to B3. Valeant’s recent efforts to restructure debt also didn’t go down well with investors.
It is going to be an uphill task henceforth for Valeant.
Zacks Rank & Key Picks
Valeant currently carries a Zacks Rank #5 (Strong Sell).
Heska’s earnings estimates increased from $1.53 to $1.65 for 2017 and from $1.90 to $2.01 for 2018 over the last 30 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 291.54%. Its share price increased 32.7% year to date.
Anthera’s loss estimates narrowed from $1.49 to 63 cents for 2017 over the last 60 days.
Retrophin’s loss estimates narrowed from 85 cents 72 cents for 2017 and from 67 cents to 53 cents for 2018 over the last 30 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 80.55%.
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Bill Ackman Apologizes for Valeant Investment Error
In a letter addressed to shareholders, Bill Ackman, chairman of Perishing Square Holdings, Ltd stated that investing in Valeant Pharmaceuticals was a big mistake on his part.
The chairman stated that firm’s stake in Valeant was the primary driver of negative performance in 2016. The firm’s stake in Valeant resulted in a return of -19.2% in 2016.
We note that the shares of Valeant have underperformed the Zacks classified Medical-Drugs industry in the last year. The stock lost 57.3% as compared to the industry’s gain of 14.4%.
We remind investors that following a substantial decline in Valeant’s share price in the first quarter of 2016, Bill Ackman and Steve Fraidin joined the board in Mar 2016 as part of Pershing Square’s effort to stabilize the company. Thereafter, the Chief Executive Officer (CEO) of the company was replaced and Joseph C. Papa became the new CEO.
The new management took various efforts to turnaround the company but in vain. Despite significant operational progresses, share price performance continues to disappoint. As a result, earlier in the month the firm sold its remaining stake in Valeant.
Ackman further added that the highly acquisitive nature of Valeant’s business required prudent capital allocation and operational execution as well as astute management skills. Ackman admitted his mistake in judging the management of the company.
Once an acquisition giant, Valeant was caught up in various controversies in 2016-price hike of specialty drugs, erroneous financial reporting and termination of contracts with Philidor Rx Services. With its new CEO, Valeant started a rebuilding process in 2016. However, that was not enough.
The company reported fourth-quarter results which beat expectations but the guidance for 2017 was disappointing.
The guidance for 2017 poses concerns about the company’s organic growth. Valeant witnessed an improvement in sales force turnover owing to some voluntary and involuntary changes. Moreover, generic competition of key drugs will continue to impact results. On Nov 8, 2016, Moody’s Investors Service downgraded the company’s credit rating from B2to B3. Valeant’s recent efforts to restructure debt also didn’t go down well with investors.
It is going to be an uphill task henceforth for Valeant.
Zacks Rank & Key Picks
Valeant currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the health care sector include Heska Corp. , Anthera Pharmaceuticals, Inc. (ANTH - Free Report) and Retrophin, Inc. . All the three stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heska’s earnings estimates increased from $1.53 to $1.65 for 2017 and from $1.90 to $2.01 for 2018 over the last 30 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 291.54%. Its share price increased 32.7% year to date.
Anthera’s loss estimates narrowed from $1.49 to 63 cents for 2017 over the last 60 days.
Retrophin’s loss estimates narrowed from 85 cents 72 cents for 2017 and from 67 cents to 53 cents for 2018 over the last 30 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 80.55%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>