VRX insider buys $29.8M

Valeant board member Jeffrey Ubben, bought $29,872,500 in VRX stock this week.

 

Value trap.

 

He had to. And that's nothing for them. Valueact owns over a billion in valeant stock. That's like you buying an eighth of a share.

 

That's alot of investment from a very powerful man. He will have more of a say in our strategy moving forward.

 

You should look at how much they already have. $30m is nothing

 

Since their failed Allergan takeover on Nov. 17, Valeant has been busy pushing up their stock price (which had taken a big hit after the drip drip drip of information on their suspect financial practices during the past year):

1.) Immediately announced $2-billion in potential stock buyback (never mind that this is something they announce every year around this time, but rarely execute even a small portion of a buyback. The Valeant board approves the potential buyback for one year, the approval expires, and then the board announces a new buyback. Share price goes up. Lather, rinse, repeat.)

2.) Announced FDA approval of Onexton Gel, a reformulation of clindamycin and benzoyl peroxide for acne treatment. Announced to showcase their R&D chops, which took a big (deserved) hit in the Allergan battle. There is nothing novel about Onexton, but a regular person --even a regular financial analyst person-- would not know that from reading the Valeant press release.

3.) Started their public Jublia campaign, having received a delayed FDA-approval in Q2 2014. This is the one that Pearson is staking his (meager) research dollars on. Nail fungus is very difficult to cure, and even Jublia, which is in some ways an improvement, can only cure about 10%+/-5% of fungal infections after months of expensive daily treatment. Here is where Pearson has started purchasing direct-to-consumer advertising (including TV ad spots) so people will initiate demands for Jublia treatment from their physicians.

4.) Jeffrey Ubben of Valueact, 2nd highest holder of Valeant stock and a newly appointed VRX board member during the difficult days of the hostile AGN takeover attempt, buys an additional 210,000 shares of VRX, worth about $30-million. A show of confidence in the stock in which he is already highly invested (and also a possible value trap).

5.) Valeant announces 29 Nov they are to redeem $445-million aggregate principal amount of 6.875% senior notes due 2018. They are trying to beat down their heavy debt, which stood at over $17-billion (!) during the Allergan takeover attempt. They did another similar debt reduction a month or two ago. When this goes through, their debt should be just under $16-billion. Their leverage is a real problem, as they are still rated as junk bond/high yield by rating agencies, a real turn-off for companies that are offered a combination of some cash and predominately Valeant's junk-rated stock as reward for selling their company to Valeant. Hmmmmm, interesting...just noticed the amount of the prinicipal senior note reduction is almost the amount that Ackman wired to them as their spoils in the failed AGN takeover. Hope they still have access to a reserve to cover the insider trading lawsuits that are coming their way...

6.) "Goldman Sachs Reinstates Valeant Pharmaceuticals at Buy" 1 Dec 2014. This is interesting, because Goldman Sachs was the sole underwriter for a $2.3-billion offering of new VRX shares just a year ago, showing the confidence to place these shares with their institutional investors. Goldman even exercised their option to buy VRX for itself, buying up $300-million in shares. But then during the Allergan takeover, AGN hired Goldman Sachs to advise them, and by the end of Sept 2014, Goldman Sachs had sold off a lot of their VRX shares and disappeared from the scene. But no harm done between bankster friends, because after Allergan was removed from play on Nov 17, barely a week later Goldman Sachs is ready to step in again with a coveted BUY rating on Valeant stock, and a new price target of $178. With all the deals that Valeant enjoys performing, and that massive and lucrative junk bond debt that needs to be continuously written for Valeant, Goldman Sachs would be foolish to let this customer go by the wayside. And did I remember to mention that Valeant CFO Howard Schiller used to be Goldman Sachs COO before he moved to Valeant? The financial world goes round and round for Team VRX...

 

7.) Directors buying at Valeant... ( Here is another way to prop up the stock price: some of the directors strategically purchase large volumes to show positive "Insider Trading"!)

From INK Research (published 6 Dec 2014)--- "While drug maker Valeant Pharmaceuticals International Inc.'s dreams of buying Botox maker Allergan may be dead, the company's revenue growth seems alive and kicking...A key question for investors is whether or not the growth can continue. Two directors appear to have put money on it. Over the past two weeks, Ron Framer bought 1,000 shares while Kate Stevenson bought 1,500. The two trades are worth about $412,274."

OK, my question, it is known that Valeant's set-up is that everyone from Pearson and Schiller on down holding management and director positions have to buy-in large into Valeant. But do some of them have to bite the bullet and buy-in at certain strategic timelines? Valeant has been suffering from the ill-advised foray into hostile bidding with Ackman for Allergan. What did Pearson say to get directors Stevenson and Framer to purchase large swaths of VRX before heading into the Q4 reporting?

 

No. Like everyone else, the directors cannot trade on insider information. Most likely they consider Valeant stock undervalued.