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A global specialty pharmaceutical company that develops, manufactures and markets a range of pharmaceutical products, primarily in the areas of neurology, infectious disease, and dermatology.
This is a great, low-risk pharma business with awesome prospects for high growth. Management invests very little in R&D. Instead they look to buy established, small, niche biotech businesses at single-digit multiples to free cash flow. These biotech's are usually poorly managed which is why they get to buy them at such a ridiculously low price. Valeant then fixes them up to a higher performance level where they can either continue to milk it for cash flow or sell it to another pharma company at a higher valuation than what Valeant paid. It's a wonderful formula that is working extremely well for them. They mention in their annual letter that all assets are available for sale at all times at the right price. The stock right now trades for less than 15 times forward earnings -- a very cheap price to pay for additional acquisitions and growth. Also, this is Sequoia Fund's largest holding.
Continue to be impressed by CEO Michael Pearson and his team. The compensation plan outlined in the proxy has got "shareholder-focused" written all over it. The Board of Directors have got these guys locked in to shareholder return. It's really something. These guys are truly thinking like smart investors within the pharma industry. Reading The Outsiders by Thorndike, recently, I couldn't help but think about Michael Pearson. We'll see...
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