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Subject:  Re: VRX - Some notes from recent news Date:  3/17/2016  6:12 PM
Author:  EightTrack4 Number:  24029 of 26247

The risks include:

3. Excessive debt levels, which could become difficult or impossible to maintain. Valeant mentioned they will be able to meet debt levels, but of course that can be taken with a grain of salt.

5. The presentation of Non- GAAP numbers are concerning, primarily because management has given us no reason to trust them ... a company who doesn’t seem to know its ass from its head.

I think VRX is going to produce substantial cash flows in the coming years but the pertinent questions are a) how much cash and b) to whom does it go?

Of course, creditors feed on the cash flow before equity holders get a single morsel.

With such a substantial debt load, Valeant appears to me to be particularly sensitive to any threat to its business model that would impinge cash flow growth or even stability.

So I would add another risk:

Slowly but surely Valeant customers retake some of the pricing power previously sacrificed to VRX, leading to price erosion or only modest price increases for VRX drugs

I'm concerned that Valeant pricing and marketing "innovation" (massive price hikes, Phildor) is off the table for many years.

I'm also concerned that the other VRX skill (according to its supporters) - acquisitons - is also off the table.

I wonder if there is any way an outsider - or even an insider - can now predict future cash flows for the business.

Unfortunately I lack the skill and Valeant knowledge to invert the question and calculate an answer - How much future cash flow generation is imputed into today's stock price?

On some level, this company is SO toxic and SO despised and trading volume is SO heavy one has to think that the end (of the downside) is nigh.

Of course some VRX bears will suggest the end is not nigh for VRX, the end is a zero.

Good luck!

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