Valeant Falls as Buffett Calls Business `Enormously Flawed'

  • Shares decline as much as 13 percent, most since March 15
  • Ackman defends drugmaker: `The company is not a sewer'

Valeant Pharmaceuticals International Inc. declined as much as 13 percent, the most in a month and a half, after billionaire Warren Buffett criticized the drugmaker’s strategy at the annual meeting of his company, Berkshire Hathaway Inc.

Valeant lost 8.6 percent to $30.50 at 12:11 p.m. in New York. The stock has fallen more than 85 percent since its August peak after months of turmoil that led to the replacement of the company’s chief executive and investigations by regulators and lawmakers. Last week, outgoing CEO Mike Pearson said at a Senate hearing on high drug prices that Valeant has made mistakes and he was too aggressive as a leader.

Valeant’s business model is “enormously flawed,” and last week’s hearings in the U.S. Senate were “not a pretty picture,” Buffett, who is Berkshire’s chairman, said on Saturday.

His deputy Charles Munger, who has been a longtime critic of the drugmaker, had harsher words for Valeant.

“Valeant of course is a sewer, and those who created it deserve all the opprobrium that they got,” Munger said at the Berkshire’s annual meeting in Omaha. On CNBC on Monday, Munger extended the criticism, calling behavior at Valeant “evil” and “demented.”

A Valeant spokeswoman declined to comment Munger’s and Buffett’s remarks.

Valeant has its defenders. Bill Ackman, who compared the company to an early-stage Berkshire last year, runs Pershing Square Capital Management LP, one of Valeant’s top holders. In an interview with CNBC, he said Munger was wrong to indict the entire company.

“The company makes a lot of very good products,” Ackman said during the interview. “The company is not a sewer.”

Munger criticized Valeant in March last year, when the company was still a Wall Street darling, saying “I’m holding my nose” at the drugmaker’s strategy of buying up other firms. In October, he said Valeant’s model of acquiring rights to treatments and jacking up prices was “similar to the worst abuses in for-profit education.”

Joe Papa, Valeant’s new CEO and the former head of drugmaker Perrigo Co., started work today, Ackman said.

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