Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

VALEANT & Philidor:  The Bezzle Exposed, Ties Cut, Life Will Likely Go On

The Perfect Storm that Engulfed Valeant and Philidor

VALEANT & Philidor Bezzle:  On Rabbit Holes and Barge Poles

QUICKNOTE:   The Discovery Phase of the Bezzle Has Begun?

Equity Bottom-Up

Bausch Health Companies / Equity Bottom-Up

An old quote variously attributed to legendary bank robbers John Dillinger and 'Slick Willie' Sutton (but probably both misattributed) asks why the robber in question robbed banks. The answer, as everyone knows, is "Because that's where the money is." The world of pharmaceutical manufacturers and industrial pharmacy is a bit like that. Prices are so high (highest in the world) in the US that the way to grow your business is to get doctors to prescribe your wallet-emptying drug more than the other guy's, and have the insurer pay for it. In the end, that's what matters - how much the insurer pays for it. And how often. On Oct 8 I <a href="http://www.smartkarma.com/insights/quicknote-the-discovery-phase-of-the-bezzle-has-begun" target="_blank">wrote</a> on Valeant Pharmaceuticals suggesting John Kenneth Galbraith's term "bezzle" might apply in the current situation. At that time, the most important commentary out there was that Valeant might not be getting to its numbers in an appropriate way, because price hikes were ridiculous and Valeant's accounting metrics were not totally standard (as discussed by AZ Value blog). I referred to reports by AZ Value Blog, John Hempton's Bronte Capital blog, Citron Research, Veritas, and others. Valeant helpfully retorted with truly ridiculous 'explanations' in a couple of 8-Ks. The disturbing thing about the price hikes was the casual nature of the explanation, which seemed to be, "We don't raise Medicare and Medicaid prices because we can't. We only raise prices for the privately insured. Which is why we are going after that business. And we are raising our gross prices but our gross to net discount/rebates/etc difference is rising so net prices aren't rising as much." This tells you Valeant IS gouging those who can pay. When you read between the lines, it means they are likely raising prices to build in a profit margin so as to be able to sponsor "charity" to waive co-pays. If you waive co-pays, then consumers are more likely to take an extra prescription even if they don't need it. But the insurance company keeps paying. And anyone in the middle keeps taking a spread.  That looked an awful lot like a bezzle. And stuffing clients with unnecessary/unwanted prescriptions (as the chatboards suggest) sounded like insurance fraud. The always-interesting <a href="http://sirf-online.org/about-us/" target="_blank">Southern Investigative Reporting Foundation</a> (SIRF) let loose a week after my first piece with a piece called the <a href="http://sirf-online.org/2015/10/19/hidden-in-plain-sight-valeants-big-crazy-sort-of-secret-story/" target="_blank">King's Gambit, Valeant's Big Secret</a> which exposed Philidor RX Services (and the <a href="http://sirf-online.org/2015/10/25/the-kings-gambit-accepted-the-annals-of-fraud/" target="_blank">Pawn Isolated</a> piece followed with more last week), a suit by a tiny pharmacy in California against Valeant suggesting fraud, and a weird world of insta-pharmacy websites all linked to Philidor (not to mention a bunch of esoteric chess references thrown around) piqued my interest. Valeant brought forward their Q3 and announced the same day. Citron Research published (in big red and black letters) a <a href="http://www.citronresearch.com/wp-content/uploads/2015/10/Valeant-Part-II-final-c.pdf" target="_blank">report</a> which claimed accounting fraud - that Valeant was using the specialty pharmacies to stuff the channels and fraudulently claim sales. Valeant <a href="http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Pharmaceuticals-Responds-To-Erroneous-Report/default.aspx" target="_blank">responded</a> by saying that it was not doing so, and that R&amp;O Pharmacies, the tiny pharmacy in Camarillo California was part of its network. Valeant disclosed a week ago Monday that it had bought an option to purchase Philidor RX Services in late 2014 and so consolidated Philidor RX Services. It did not disclose the relationship between Philidor and R&amp;O. In fact, I think Citron missed the big reveal. Valeant actually revealed something significant on Oct21 by saying that it consolidated Philidor because of Variable Interest Entity accounting having bought an option.Yesterday, nursing significant reputational damage, Valeant held a long "open" conference call with a phalanx of executives to discuss Philidor. It was very clearly a pre-scripted conference call. Everyone knew what they could say and it was all very, well.... careful. Disappointingly so. Valeant has an option but no legal obligations. Valeant does not own or control despite the VIE accounting. Valeant is still considering whether to exercise the option or not. Valeant believes neither it nor Philidor have done anything illegal. Philidor is not 'material'. It is all very careful - listeners could tell there was a lot of lawyering behind what was said. And as to materiality, yesterday Valeant said Philidor was 7% of Valeant's entire EBITA and responsible for 44% of Jublia scrips. If this had been any other outlet, do you not think Valeant would be bragging about that channel growth? From nowhere to 7% of EBITA in 9 months? Growing quickly? That is the whole story behind Valeant. And it only cost Valeant $133mm so far ($100mm for the option plus another $33mm so far for KPI incentives)? If Valeant could buy another 7% of EBITA somewhere else for $133mm I am sure it would. That in and of itself tells you there is a problem somewhere. By saying a week ago that it did not count sales by Philidor's network affiliates until the drug was shipped to the customer, it was clear that Valeant knows Philidor is the 'hub' for an effort to build out a nationwide mail-order pharmacy business and knew what was going on. By Gary Tanner (formerly of Medicis, now of Valeant), being one of the people visiting Russell Reitz (read the documents attached to the lawsuits - available on <a href="http://sirf-online.org/" target="_blank">SIRF</a> or Bronte Capital's blog) at R&amp;O, Valeant was directly meddling in the affairs of Philidor, treating it like a subsidiary. Gary Tanner is a bigwig at Valeant and as other investigators have mentioned, Valeant management has argued to its shareholders that he is a serious value-add to Valeant. Valeant is playing coy when it says it does not own and control Philidor. The real truth is that Philidor RX Services cannot exist without the full cooperation, even explicit financing and involvement of Valeant. If one goes back to first principles, Philidor is a mail-order pharmacy. The only way it gets paid is by shipping something. If its only customer is Valeant, that meant that it shipped Valeant product, got paid for it by an insurer, then paid Valeant. Would Valeant deliver $8k "worth" of Jublia to a pharmacy which it had never heard of without payment? Earlier this year Philidor was processing thousands of scrips a day. Assuming something tiny like $100 of face value per scrip, that meant Valeant was floating hundreds of thousands or millions of dollars per day (Jublia is $8k a pop and Philidor is 44% of Jublia scrip count) to Philidor, and only getting the checks from insurers later (assuming the insurer payment processing takes a week and then the check takes a week to clear, that is many millions of dollars that Valeant is floating on Philidor). I am presuming that as cash-flow-sensitive as Valeant is, it would not float millions of dollars on a pharmacy without knowing everything there is to know. It is possible that people walk into a licensed pharmacy, start buying stuff to the tune of hundreds of thousands of dollars a day, and Valeant agrees to put it on credit. It's unlikely but possible.But that is not the smoking gun. The real smoking gun is that if someone had simply "heard about" Philidor from a friend, the only thing that person could do is call the toll-free number on the website. There is nothing on the web or the Philidor <a href="http://www.philidorrxservices.com" target="_blank">website</a> about them or what they do. Philidor is not advertising. And the 'advertising' garnered from customer reviews on customer review sites is not positive or welcome (granted, those sites attract negative reviews like a magnet). So how does Philidor get customers? Valeant MRs give little <a href="http://4.bp.blogspot.com/-7YEDT6e0YvE/ViXPFYJVprI/AAAAAAAANRM/zaUrQKiVDzs/s1600/CRfI1WcUAAAfK92.jpg" target="_blank">one-pagers</a> and low/zero co-pay coupons to doctors with the Philidor toll-free number on it.  Valeant is explicitly pushing this through its MRs to doctors. This is a "team" where Valeant is THE MAIN OFFENSIVE PLAYER and Philidor is the rest of the team (the defense is Valeant's legal team?). Without Valeant (or another pharma mfr), Philidor has zero business.The other smoking gun is the "option" which Valeant paid. Valeant paid $100mm for a company which generates 7% of Valeant EBITA? In a growth company where the company wants to be a $150bn market cap? I don't think so. Philidor had a staff earlier this year of 200+ people, plus principals, and a huge business growing to a thousand people churning stuff (and according to the blogs working 60 hours a week). And Valeant was fronting millions or tens of millions of dollars of drugs to them. This looks like a "fee" Valeant paid to have someone else build Philidor for them. So now Valeant is wary of the way it looks, despite explaining it is OK "because Walmart does it." So despite already owning the option struck at zero, it might walk away? Yes. And with good reason. There is nothing about the 'network' of Philidor RX Services pharmacies which would pass the smell test.On the surface, Philidor is just a network of specialty pharmacies conveniently processing specialty pharmaceuticals on behalf of its customers - conveniently shipping before it gets paid. Digging deeper, it doesn't look pretty or professional. Look at the google street view of West Wilshire, Saferx, OrbitPharma. Look at the websites of the 5 pharmacies  (<a href="http://www.philidorrxservices.com" target="_blank">PhilidorRX</a>, <a href="http://westwilshirepharma.com" target="_blank">WestWilshire</a>, <a href="http://www.dandapharma.com" target="_blank">D&amp;A</a>, <a href="http://randopharmacy.com" target="_blank">R&amp;O</a>, <a href="http://saferxpharma.com" target="_blank">SafeRX</a>, <a href="http://orbitpharmacy.com" target="_blank">Orbit)</a>. Look at the details (including rampant "typos" or deliberate mistakes to obfuscate) of the state filings (the Lucena Holdings filing for example), or look at the lawsuits, the double-hatting (and triple-hatting sometimes), and the cross-addressing of BQ6, Philidor, and other entities. A quick example of the mistakes, "typos", intermingling of executive labels, and intrigue involved is in the LucenaHoldings/West Wilshire filing of a partial change in ownership. The <a href="http://www.propublica.org/documents/item/2475515-west-wilshire-phy-37949.html" target="_blank">form</a> is in Charles Ornstein's ProPublica <a href="http://www.propublica.org/article/documents-raise-questions-about-valeant-pharmacy-relationships-california" target="_blank">article</a>. The Philidor RX Services California application was made August 15, 2013. Sherri Leon joined Philidor as chief pharmacist that month according to her LinkedIn profile. The Lucena application was a year later in Sep2014, four months after the California Board of Pharmacy had rejected Philidor's application because of lies by Matthew Davenport, in the first application labelled as being CEO of Philidor RX. Weirdly, the Philidor RX Services application for resident pharmacy permit in Pennsylvania just 6 weeks earlier had Andrew Davenport as CEO. In the California permit application, the Philidor bookkeeper/accountant was noted as Greg Blaszczynski. Question 7 asks "Are you currently, or have you previously been, associated in business with any person, partnership, corporation, or other entity.... whose pharmacy permit... was denied?" Sherri Leon is signatory on the Lucena/WW application. Greg B is the "owner" of Lucena. Matthew Davenport is noted as the person on the Lucena formation document appended to the filing. Both were explicitly involved in the denial of Philidor's permit for California. They were named. If Sherri Leon were truly unaware, so be it. But Greg B and MD were not unaware. The telephone number on p8 belongs to Philidor - it is the same toll-free number as on the website and the brochures doctors hand out to patients. Further, you will see that a bunch of addresses are blacked out, but you will see on p8 the address of Lucena Holdings. It is, I expect, 'incorrect' not to say false - it is the house on a corner of a street, across the street from the apparent home address of the BQ6 Media principal who is listed as Lucena's owner in the same application. Which raises a question. If a BQ6 Media principal owns Lucena which owns a piece of West Wilshire, how does Philidor use it, or compensate Lucena for its use? What Next?Reason suggests that Valeant knows more than it is saying. And this looks like a governance nightmare at best, significant fraud at worst. So more than anything else, Valeant wants the whole thing to go away. Valeant has to step VERY carefully. The safest thing here would be to simply say "We made a mistake by moving too fast. We trusted these guys to do it right and it appears they haven't. We're going to go in and conduct a big serious audit and make sure it gets done right." But insurance companies and regulators should have a serious problem with the business model of 'doing it right'. It is effectively insurance fraud to stuff the scrip channel with auto-refills without co-pays, or to generate scrip count you wouldn't otherwise get because of lower or waived co-pays. Is this real intentional fraud on the part of Valeant, the Davenports and cohorts, or is this overzealous business builders pressured by greed and the weight of a 10x PSR multiple finally getting the better of a small entrepreneurial team of North Philly cubicle jockeys trying to build the next great retail subscription sales empire growing 1000% a year? It is either monumentally sloppy, or there is illegality and fraud involved. Either way, it is highly likely to slow down. This is just plain bad business.The problem with all that is.... as far as I can tell, Valeant has a seriously large negative tangible book value. It relies on growth. Unless Valeant can sweep this under the rug, I could see regulators and inquiries, and cancellation of permits, lots of insurer audits, and doctors putting the Philidor promotions on hold for a while. That means no growth, or negative growth. Even worse, the entire discovery process may raise questions about the larger bezzle - that of the entire private insurance health care system in the US. Just because it is the way it is doesn't mean it has to be. The Bezzle Discovery is in full swing. Galbraith described the swings of the bezzle as too far one way, then too far the other. Mind the pendulum. This time it's too late for <a href="http://www.smartkarma.com/insights/a-share-margin-gorillas-and-grandfather-clocks" target="_blank">gorillas</a>. Valeant is not in a good spot. It has been M&amp;A-minded for years, always hoping for the next deal to be the one which allows them to pay off the debt from the previous ones. This is all going to slow down. Valeant will go "ex-growth" for a while. What's the right multiple for that when the company has tangible book value of negative 34 billion dollars? You tell me... More below the fold for subscribers.

An old quote variously attributed to legendary bank robbers John Dillinger and 'Slick Willie' Sutton (but probably both misattributed) asks why the robber in question robbed banks. The answer, as everyone knows, is "Because that's where the money is." The world of pharmaceutical manufacturers and industrial pharmacy is a bit like that. Prices are so high (highest in the world) in the US that the way to grow your business is to get doctors to prescribe your wallet-emptying drug more than the other guy's, and have the insurer pay for it. In the end, that's what matters - how much the insurer pays for it. And how often. On Oct 8 I wrote on Valeant Pharmaceuticals suggesting John Kenneth Galbraith's term "bezzle" might apply in the current situation. At that time, the most important commentary out there was that Valeant might not be getting to its numbers in an appropriate way, because price hikes were ridiculous and Valeant's accounting metrics were not totally standard (as discussed by AZ Value blog). I referred to reports by AZ Value Blog, John Hempton's Bronte Capital blog, Citron Research, Veritas, and others. Valeant helpfully retorted with truly ridiculous 'explanations' in a couple of 8-Ks. The disturbing thing about the price hikes was the casual nature of the explanation, which seemed to be, "We don't raise Medicare and Medicaid prices because we can't. We only raise prices for the privately insured. Which is why we are going after that business. And we are raising our gross prices but our gross to net discount/rebates/etc difference is rising so net prices aren't rising as much." This tells you Valeant IS gouging those who can pay. When you read between the lines, it means they are likely raising prices to build in a profit margin so as to be able to sponsor "charity" to waive co-pays. If you waive co-pays, then consumers are more likely to take an extra prescription even if they don't need it. But the insurance company keeps paying. And anyone in the middle keeps taking a spread.  That looked an awful lot like a bezzle. And stuffing clients with unnecessary/unwanted prescriptions (as the chatboards suggest) sounded like insurance fraud. The always-interesting Southern Investigative Reporting Foundation (SIRF) let loose a week after my first piece with a piece called the King's Gambit, Valeant's Big Secret which exposed Philidor RX Services (and the Pawn Isolated piece followed with more last week), a suit by a tiny pharmacy in California against Valeant suggesting fraud, and a weird world of insta-pharmacy websites all linked to Philidor (not to mention a bunch of esoteric chess references thrown around) piqued my interest. Valeant brought forward their Q3 and announced the same day. Citron Research published (in big red and black letters) a report which claimed accounting fraud - that Valeant was using the specialty pharmacies to stuff the channels and fraudulently claim sales. Valeant responded by saying that it was not doing so, and that R&amp;O Pharmacies, the tiny pharmacy in Camarillo California was part of its network. Valeant disclosed a week ago Monday that it had bought an option to purchase Philidor RX Services in late 2014 and so consolidated Philidor RX Services. It did not disclose the relationship between Philidor and R&amp;O. In fact, I think Citron missed the big reveal. Valeant actually revealed something significant on Oct21 by saying that it consolidated Philidor because of Variable Interest Entity accounting having bought an option.Yesterday, nursing significant reputational damage, Valeant held a long "open" conference call with a phalanx of executives to discuss Philidor. It was very clearly a pre-scripted conference call. Everyone knew what they could say and it was all very, well.... careful. Disappointingly so. Valeant has an option but no legal obligations. Valeant does not own or control despite the VIE accounting. Valeant is still considering whether to exercise the option or not. Valeant believes neither it nor Philidor have done anything illegal. Philidor is not 'material'. It is all very careful - listeners could tell there was a lot of lawyering behind what was said. And as to materiality, yesterday Valeant said Philidor was 7% of Valeant's entire EBITA and responsible for 44% of Jublia scrips. If this had been any other outlet, do you not think Valeant would be bragging about that channel growth? From nowhere to 7% of EBITA in 9 months? Growing quickly? That is the whole story behind Valeant. And it only cost Valeant $133mm so far ($100mm for the option plus another $33mm so far for KPI incentives)? If Valeant could buy another 7% of EBITA somewhere else for $133mm I am sure it would. That in and of itself tells you there is a problem somewhere. By saying a week ago that it did not count sales by Philidor's network affiliates until the drug was shipped to the customer, it was clear that Valeant knows Philidor is the 'hub' for an effort to build out a nationwide mail-order pharmacy business and knew what was going on. By Gary Tanner (formerly of Medicis, now of Valeant), being one of the people visiting Russell Reitz (read the documents attached to the lawsuits - available on SIRF or Bronte Capital's blog) at R&amp;O, Valeant was directly meddling in the affairs of Philidor, treating it like a subsidiary. Gary Tanner is a bigwig at Valeant and as other investigators have mentioned, Valeant management has argued to its shareholders that he is a serious value-add to Valeant. Valeant is playing coy when it says it does not own and control Philidor. The real truth is that Philidor RX Services cannot exist without the full cooperation, even explicit financing and involvement of Valeant. If one goes back to first principles, Philidor is a mail-order pharmacy. The only way it gets paid is by shipping something. If its only customer is Valeant, that meant that it shipped Valeant product, got paid for it by an insurer, then paid Valeant. Would Valeant deliver $8k "worth" of Jublia to a pharmacy which it had never heard of without payment? Earlier this year Philidor was processing thousands of scrips a day. Assuming something tiny like $100 of face value per scrip, that meant Valeant was floating hundreds of thousands or millions of dollars per day (Jublia is $8k a pop and Philidor is 44% of Jublia scrip count) to Philidor, and only getting the checks from insurers later (assuming the insurer payment processing takes a week and then the check takes a week to clear, that is many millions of dollars that Valeant is floating on Philidor). I am presuming that as cash-flow-sensitive as Valeant is, it would not float millions of dollars on a pharmacy without knowing everything there is to know. It is possible that people walk into a licensed pharmacy, start buying stuff to the tune of hundreds of thousands of dollars a day, and Valeant agrees to put it on credit. It's unlikely but possible.But that is not the smoking gun. The real smoking gun is that if someone had simply "heard about" Philidor from a friend, the only thing that person could do is call the toll-free number on the website. There is nothing on the web or the Philidor website about them or what they do. Philidor is not advertising. And the 'advertising' garnered from customer reviews on customer review sites is not positive or welcome (granted, those sites attract negative reviews like a magnet). So how does Philidor get customers? Valeant MRs give little one-pagers and low/zero co-pay coupons to doctors with the Philidor toll-free number on it.  Valeant is explicitly pushing this through its MRs to doctors. This is a "team" where Valeant is THE MAIN OFFENSIVE PLAYER and Philidor is the rest of the team (the defense is Valeant's legal team?). Without Valeant (or another pharma mfr), Philidor has zero business.The other smoking gun is the "option" which Valeant paid. Valeant paid $100mm for a company which generates 7% of Valeant EBITA? In a growth company where the company wants to be a $150bn market cap? I don't think so. Philidor had a staff earlier this year of 200+ people, plus principals, and a huge business growing to a thousand people churning stuff (and according to the blogs working 60 hours a week). And Valeant was fronting millions or tens of millions of dollars of drugs to them. This looks like a "fee" Valeant paid to have someone else build Philidor for them. So now Valeant is wary of the way it looks, despite explaining it is OK "because Walmart does it." So despite already owning the option struck at zero, it might walk away? Yes. And with good reason. There is nothing about the 'network' of Philidor RX Services pharmacies which would pass the smell test.On the surface, Philidor is just a network of specialty pharmacies conveniently processing specialty pharmaceuticals on behalf of its customers - conveniently shipping before it gets paid. Digging deeper, it doesn't look pretty or professional. Look at the google street view of West Wilshire, Saferx, OrbitPharma. Look at the websites of the 5 pharmacies  (PhilidorRX, WestWilshire, D&amp;A, R&amp;O, SafeRX, Orbit). Look at the details (including rampant "typos" or deliberate mistakes to obfuscate) of the state filings (the Lucena Holdings filing for example), or look at the lawsuits, the double-hatting (and triple-hatting sometimes), and the cross-addressing of BQ6, Philidor, and other entities. A quick example of the mistakes, "typos", intermingling of executive labels, and intrigue involved is in the LucenaHoldings/West Wilshire filing of a partial change in ownership. The form is in Charles Ornstein's ProPublica article. The Philidor RX Services California application was made August 15, 2013. Sherri Leon joined Philidor as chief pharmacist that month according to her LinkedIn profile. The Lucena application was a year later in Sep2014, four months after the California Board of Pharmacy had rejected Philidor's application because of lies by Matthew Davenport, in the first application labelled as being CEO of Philidor RX. Weirdly, the Philidor RX Services application for resident pharmacy permit in Pennsylvania just 6 weeks earlier had Andrew Davenport as CEO. In the California permit application, the Philidor bookkeeper/accountant was noted as Greg Blaszczynski. Question 7 asks "Are you currently, or have you previously been, associated in business with any person, partnership, corporation, or other entity.... whose pharmacy permit... was denied?" Sherri Leon is signatory on the Lucena/WW application. Greg B is the "owner" of Lucena. Matthew Davenport is noted as the person on the Lucena formation document appended to the filing. Both were explicitly involved in the denial of Philidor's permit for California. They were named. If Sherri Leon were truly unaware, so be it. But Greg B and MD were not unaware. The telephone number on p8 belongs to Philidor - it is the same toll-free number as on the website and the brochures doctors hand out to patients. Further, you will see that a bunch of addresses are blacked out, but you will see on p8 the address of Lucena Holdings. It is, I expect, 'incorrect' not to say false - it is the house on a corner of a street, across the street from the apparent home address of the BQ6 Media principal who is listed as Lucena's owner in the same application. Which raises a question. If a BQ6 Media principal owns Lucena which owns a piece of West Wilshire, how does Philidor use it, or compensate Lucena for its use? What Next?Reason suggests that Valeant knows more than it is saying. And this looks like a governance nightmare at best, significant fraud at worst. So more than anything else, Valeant wants the whole thing to go away. Valeant has to step VERY carefully. The safest thing here would be to simply say "We made a mistake by moving too fast. We trusted these guys to do it right and it appears they haven't. We're going to go in and conduct a big serious audit and make sure it gets done right." But insurance companies and regulators should have a serious problem with the business model of 'doing it right'. It is effectively insurance fraud to stuff the scrip channel with auto-refills without co-pays, or to generate scrip count you wouldn't otherwise get because of lower or waived co-pays. Is this real intentional fraud on the part of Valeant, the Davenports and cohorts, or is this overzealous business builders pressured by greed and the weight of a 10x PSR multiple finally getting the better of a small entrepreneurial team of North Philly cubicle jockeys trying to build the next great retail subscription sales empire growing 1000% a year? It is either monumentally sloppy, or there is illegality and fraud involved. Either way, it is highly likely to slow down. This is just plain bad business.The problem with all that is.... as far as I can tell, Valeant has a seriously large negative tangible book value. It relies on growth. Unless Valeant can sweep this under the rug, I could see regulators and inquiries, and cancellation of permits, lots of insurer audits, and doctors putting the Philidor promotions on hold for a while. That means no growth, or negative growth. Even worse, the entire discovery process may raise questions about the larger bezzle - that of the entire private insurance health care system in the US. Just because it is the way it is doesn't mean it has to be. The Bezzle Discovery is in full swing. Galbraith described the swings of the bezzle as too far one way, then too far the other. Mind the pendulum. This time it's too late for gorillas. Valeant is not in a good spot. It has been M&amp;A-minded for years, always hoping for the next deal to be the one which allows them to pay off the debt from the previous ones. This is all going to slow down. Valeant will go "ex-growth" for a while. What's the right multiple for that when the company has tangible book value of negative 34 billion dollars? You tell me... More below the fold for subscribers.

VALEANT: Bezzle Discovery is in Full Swing