Ackman defends Valeant, hints at more changes

[May 03, 2016]  By Svea Herbst-Bayliss and Caroline Humer

BOSTON/NEW YORK (Reuters) - Billionaire investor William Ackman on Monday mounted a vigorous defense of Valeant Pharmaceuticals, ruling out any sale of the drug company's "crown jewel" assets but saying price cuts and even a new name may be in its future.

Ackman, whose Pershing Square Capital Management owns 9 percent of Valeant, predicted the company would turn around with the help of its new chief executive officer and by selling greater volumes of products instead of just raising the price of its drugs.

He also took aim at Berkshire Hathaway <BRKa.N> Vice Chairman Charlie Munger, who criticized Valeant at Berkshire's annual shareholder meeting over the weekend.

"The company is not a sewer," Ackman said on CNBC television's "Halftime Report," echoing the words Munger used to describe Valeant. "It is not fair to indict an entire company based on the actions of a few," Ackman said.

Valeant has become Ackman's biggest headache in the last year as the stock price tumbled some 85 percent. One year ago he touted the Canadian company as one of his best ideas at the Sohn Investment conference. This year he will not be speaking at the conference, where he has been a regular for years.

Ackman told CNBC, he is sticking with Valeant because he feels he can "fix" the company.

"The time to invest is pretty much when everyone thinks this is a bad idea," Ackman said, calling Valeant "the cheapest large company I've seen in my career."

In the roughly six weeks that Ackman and his firm's Vice Chairman Steve Fraidin have been directors on Valeant's board, the board has hired Joseph Papa to replace Michael Pearson as chief executive and ensured that the company released its long delayed annual report on Friday.

On Monday, Ackman said that Valeant does not have to sell any assets to meet obligations and added that it will have a "an investment grade balance sheet sometime within the next two to three years without selling one asset."

At some point the Valeant name may be jettisoned, Ackman said, acknowledging that company employees are now embarrassed to say they work for the company.

Valeant's aggressive accounting tactics and practice of pushing up prices on newly acquired drugs has hurt the company, putting it into the crosshairs of other prominent investors, including Munger and Buffett at Berkshire, who called Valeant's business model "enormously flawed."

Munger acknowledged Ackman's investing acumen in an interview with Fox Business, saying "he's certainly made a brilliant investment in General Growth Properties <GGP.N> and he's totally right about Herbalife <HLF.N>" where Ackman has a $1 billion short position.

Ackman said Valeant's management and the board understand the anger shown toward the company by lawmakers and investors.

As Ackman spoke, Valeant's stock cut its losses by nearly half to trade at $32.52 per share.

(Reporting by Svea Herbst-Bayliss and Caroline Humer; Editing by Chizu Nomiyama and Cynthia Osterman)

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