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No. of Recommendations: 1
TA considerations aside, it is a bit surprising to me to see the stock climb so high. The big question for Valeant is whether the model still works, if they are being scrutinized about cheating on insurance rules, whether that cheating is legal or illegal. Having Walgreen 'replace' Philidor as a pharmacy distributor does not address this point.

The problem with Philidor is not that they were naughty and got caught - it is that it doesn't make sense for a pharmacy to accept high Valeant prices for generic drugs that can be bought for less by other generic drugmakers. Walgreen will not be at all like Philidor in this regard - instead of being a fully owned, captive distributor that is basically there to make sure Valeant's products get to the end-client, they are a distributor that will have competing interests, such as actually satisfying their customers' wishes of getting a good drug at the cheapest possible price.

My guess is that $50 is a much more likely price than $150, for VRX shares, but I would be delighted for the price to see $150 first, and in that case I would quite likely be in a position to enjoy the passage from $150 to $50. (I unfortunately covered my short just as the rout was beginning, at around $150.)

Regards, DTB
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