A lot of investors have been comparing Valeant Pharmaceuticals to a lot of other companies lately. There was Citron Research, which last week issued a report calling Valeant “the pharmaceutical Enron,” setting off a storm of criticism over the drugmaker’s accounting practices. Earlier today, Fortune columnist Joshua Brown (a.k.a. the Reformed Broker) reminded us that way back in April, Berkshire Hathaway vice chairman Charlie Munger likened Valeant to ITT Corporation (ITT), a conglomerate that infamously was forced to split itself up.
Munger’s analogy is particularly ironic because Valeant (VRX) has also been compared to Berkshire Hathaway (BRKA)—by Bill Ackman, the hedge fund manager whose firm Pershing Square is one of Valeant’s largest shareholders.
At an investment conference in May, Ackman explained that his long position in the pharma firm stemmed from his belief that Valeant’s aggressive acquisition style—and the outsized returns it had so far produced—made the company akin to a younger version of Warren Buffett’s Berkshire. “Valeant is a very early-stage Berkshire,” Ackman said in his presentation. Expressing his awe over the big stock price pops triggered by Valeant’s M&A announcements, Ackman continued, “Shareholders should not be allowed to make this much money.”
But on a conference call defending his Valeant investment on Friday, Ackman did not repeat the Berkshire metaphor. (He did, however, liken himself to Buffett, in that Buffett bought shares in American Express (AXP) after a 1963 scandal caused their price to swoon. Ackman upped his stake in Valeant last week as its share price plummeted amid the allegations.)
Instead, Ackman suggested that Valeant might have something in common with Amazon (AMZN). The hedge fund manager’s investor call came on the heels of Valeant’s announcement earlier Friday morning that it was “severing all ties” with Philidor Rx Services, the mail-order pharmacy whose relationship with the drug company had sparked the whole hullabaloo about potential wrongdoing. But shortly after Ackman got on the phone, he plugged mail-order pharmacies, indicating that they presented an opportunity for both Valeant as well as Amazon CEO Jeff Bezos. The Wall Street Journal reported the comments:
Bill Ackman said he has an idea for Jeff Bezos: mail-order pharmacies.
If you want to think about traditional retail pharmacies, it should be disintermediated. “Specialty pharmacy is the future of the industry,” he said.
As for whether Ackman still believes Valeant could be the next Berkshire Hathaway, a spokesperson for the hedge fund manager did not respond to a request for comment.