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Valeant Pharmaceuticals (VRX) Bull-Bear Debate Rages

October 30, 2015 12:57 PM EDT

The bull-bear battle in beaten up and highly-questioned Valeant Pharma (NYSE: VRX) took center stage again today. Bill Ackman from Pershing Square on the bull side and Andrew Left from Citron Research on the bear side. Currently the bears are winning and the stock is down another 10% today and again below the $100 level.

This morning the company announced that it is severing all ties with Philidor Rx and Philidor has informed Valeant that it will shut down operations as soon as possible. Valeant's controversial relationship with Philidor has been at the center of the short attacks, which have alleged deception, channel stuffing and possible fraud.

Bill Ackman hosted a 4 hour long conference call today to make his case on the stock. Ackman is currently down 47% ($186 cost basis) on his long bet but sees shares as significantly undervalued and offering an opportunity.

The hedge fund manger blamed part off the sell-off in the stock on Valeant's mistake of underinvesting in its public relations, which made it vulnerable to short seller attacks with the information void.

Ackman said the business is sound and pointed to the company's top assets, including Bausch & Lomb‎.

He highlighted that excluding Philidor-related earnings, the stock trades at less than 8x 2016 cash EPS. He made the case that the stock is worth $180-$240 near-term and $262-$350 longer-term.

In making his case that the sell-off creates a buying opportunity, he highlighted the 1963 Salad Oil Scandal, or Soybean Scandal. At that time Tino De Angelis obtained $150 million in loans from American Express and others. De Angelis perpetuated a scam by mostly having water in ships he claimed were full with salad oil. American Express ended up losing nearly $58 million on the scam and its stock crashed more than 50%. With blood in the Street, Warren Buffett swooped in to build a large position and made billions.

Ackman said he would buy more shares but the fund is "full invested", having "scraped together a couple hundred million" to buy the recent 2 million shares.

While Ackman's conference call was ongoing, Citron's Andrew Left again took a swipe. Citron tweeted that Valeant has a better chance than Herbalife of "going to $0". Citron said it will have more details on Monday, calling the company 'dirtier' than anyone has reported.



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