Hanging out in Madrid: the broker-sales-pitch-slide-deck from hell

I am hanging out with friends in Madrid and they are telling stories of the bust. These are the sort of guy who try to understand bank balance sheets.

The best story though is Ciudad Real Airport - a true financial disaster south of Madrid - an international airport that never took an international flight and for which there was no obvious use.

A while back the BBC reported the airport sold at auction for 10,000 Euro - less than 0.001% of the construction cost.

And maybe that was true.

But I am in possession of a pitch deck for the airport from the days brokers thought they might recover some of the costs. It is perhaps the funniest artefact I know of the bubble.

So here is your "Strategic Airport Opportunity".

It is an "Unprecedented Opportunity to Secure Aviation Asset for US in Europe".

After all it has a power station, fire station and fuel depot and is larger than any US base in Europe.

There was "tacit government approval for a US presence" which made you wonder why a two-bit broker was selling this fine asset.

And the location was truly strategic:

It appears to be a two hour flight from lots of important places.

We are told there is Arabic interest as a royal family safe haven. It might also be a good site for potential transoceanic abort landings for the space shuttle.

Just to make this seem real Transoceanic Abort Landings has an acronym: TAL.

And just to gee-up interest we are told of other interest.

The US military was reportedly interested.

Lehman Brothers was going to buy it for $2.8 billion. Now the price is halved.

And the Arabic Royal Family will likely buy it if the US does not show interest.

It seems that Spanish Airports are like regional Chinese apartment buildings - where capital goes to die.




John

Valeant affiliates still setting up and operating bogus pharmacies

Valeant has responded to my last blog post. To quote:

Short sellers have been making false, unsubstantiated claims about Valeant for months in an attempt to drive down our stock price, and today’s allegations also contain significant inaccuracies. Valeant has already disclosed that 7.2% of our sales this year through the third quarter went through specialty pharmaceutical channels, and that has not changed. As we have said, in October we decided it was appropriate to sever our relationship with Philidor after allegations about their business practices came to light. The entities mentioned today appear to have been formed on or prior to 8/18/2015, based on public records. Furthermore, our board of directors has appointed an ad hoc committee to review allegations related to Valeant’s business relationship with Philidor and related matters

There is no denial the entities were set up either by Valeant or Valeant associates.

They can't and don't deny that because it is the truth.

But they deny that they are still setting up or running these pharmacies. I could have fun with that assertion - lists of transactions if they want.

However one will do. A chess named pharmacy from that list (ELO Pharmacy) registered in Illinois on 28 October - after the Philidor expose.

Here is a screen shot.

It is in chess 50 moves without pawn-move or capture until we declare a draw.

My claims are neither false nor unsubstantiated.

And you dear Valeant management have a problem.

On fifty moves without pawn-move or capture: we just reset the clock.





John

Philidor 2.0: Valeant and Stephen King play Chess with a lot of pharmacies

Valeant (VRX:NYSE) has managed the improbable.

It sells 

(a). Generic drugs often with close substitutes,

(b). It has raised their prices sometimes to absurd levels ($1000 acne antibiotics with full generic substitutes is an example)

(c). It claims to raise volumes of these products.

I call this the improbable trio. It seems improbable that a company could do this. Not impossible, just improbable.

The trick it appears is reliance on non-traditional distribution models. 

The size of non-traditional channels

Valeant's non-traditional channels are very large. During the dispute between Allergan and Valeant Allergan noted that the IMS sales data for Valeant products was crappy. 

Valeant responded that IMS data was unreliable for Valeant. To quote:

U.S. IMS data will cover less than 30% of Valeant’s business and, for that portion of Valeant’s business IMS covers, the IMS data will not properly collect sales through a numbers of channels (e.g., specialty pharmacy, physician dispensed sales, corporate accounts, and alternative fulfillment).

The non-traditional distribution methods are hugely important in Valeant.

The Philidor allegation

The Philidor allegation is that Valeant [through undisclosed proxies] established or owned pharmacies (such as R&O in California) and used their pharmacy numbers to deceive insurance companies into believing that scripts for expensive drugs with generic substitutes were being presented at smaller suburban pharmacies rather than at a Valeant captive pharmacy. 

Bloomberg has reported for instance that Philidor staff routinely wrote "dispense as written" on scripts to prevent generic substitution. [This is fraud.] 

If however they put all those scripts through one Valeant associated pharmacy the insurance companies would wise up.

So they put the scripts through multiple pharmacies - deceiving the insurance companies into not checking for the fraud.

How many pharmacies?

One of the games we have been playing is spot-the-Valeant proxy pharmacy.

We know pharmacies outside the Philidor web: the proxy captive pharmacies extend beyond Philidor.

But the scale of Philidor problems is not widely understood and has not been disclosed to the market. I doubt Mr Ackman would have adopted his Martingale strategy had he fully understood.

So lets start.

All these pharmacies were registered in Delaware. Many are named after chess terms (as are many previously disclosed Philidor entities) but we are also noting a distinct Stephen King theme.

This should keep the fraud investigators for various insurance companies busy. I suspect this will also get added to the list of things Congress is investigating.

Entity	State	Entity ID	Registered Agent	Notes
Fifty Moves, LLC	DE	5640758	Corporation Service Company	Chess term: Fifty Move Rule
ELO Pharmacy, LLC	DE	5762328	Corporation Trust Company	Chess term: ELO ranking system
C-K Pharmacies, LLC	DE	5762330	Corporation Trust Company	Chess term: The Caro-Kahn defence
Tarrasch Pharmacy Holdings, LLC	DE	5762881	Corporation Trust Company	Chess term: Tarrasch was a great player
NC3 Pharmacy, LLC	DE	5770687	Corporation Service Company	Chess term: The rarely used Dunst Opening
Lasker Pharmacies, LLC	DE	5770702	Corporation Service Company	Chess term: After the great player and theorist Emmanuel Lasker.
B&W Pharmacies, LLC	DE	5770706	Corporation Service Company	Black and White: the usual colours of chess pieces.
NC3 Pharmacy Holdings, LLC	DE	5770708	Corporation Service Company	Another Dunst Opening reference
Knight & Knight Pharmacies, LLC	DE	5770718	Corporation Service Company	Chess Knights I presume.
First Rank Pharmacies, LLC	DE	5770741	Corporation Service Company	Another entity is called "Back Rank: another chess term.
Forsta, LLC	DE	5774549	A Registered Agent, Inc.	Entity by same name sought wholesale pharmacy registration in AZ with Gary Tanner (Owner) and Jacob Power (Pharmacist-in-Charge), both ex-Philidor/VRX
Charmberlain Pharmacy, LLC	DE	5775980	Corporation Service Company	Named for a favourite Stephen King location...
Mears Pharmacy, LLC	DE	5775991	Corporation Service Company	Named for a repeated Stephen King character...
Marsten House Pharmacy, LLC	DE	5775997	Corporation Service Company	Named for a key location in Salem's Lot. Notably a symbol of evil.
Torrance Pharmacy, LLC	DE	5776000	Corporation Service Company	Named for key characters in The Shining.
Overlook Pharmacy, LLC	DE	5776004	Corporation Service Company	The Hotel in The Shining.
Topiary Pharmacy, LLC	DE	5776008	Corporation Service Company	Topiary animals in The Shining.
Hallorann Pharmacy, LLC	DE	5776022	Corporation Service Company	Named for the chef at the Overlook Hotel in The Shining.
Decker Pharmacy, LLC	DE	5776025	Corporation Service Company	Possibly named for another Stephen King character...
Twinner's Pharmacy, LLC	DE	5776026	Corporation Service Company	Named for Stephen King's repeated doppleganger meme.
Parkus Pharmacy, LLC	DE	5776027	Corporation Service Company	A Stephen King character in The Talisman.
Halleck's Pharmacy, LLC	DE	5776029	Corporation Service Company	Named for another major Stephen King Character.
Flagg Pharmacy, LLC	DE	5776032	Corporation Service Company	Randall Flagg is a major Stephen King Character
Derry Pharmacy, LLC	DE	5776033		Derry is a repeated location in Stephen King novels.
Pennywise Pharmacy, LLC	DE	5776037	Corporation Service Company	Pennywise the Clown is a recurring Stephen King character.
Plymouth Pharmacy, LLC	DE	5776038	Corporation Service Company	The iconic Stephen King car in The Shining and others was a Plymouth.
Hanscom Pharmacy, LLC	DE	5776039	Corporation Service Company	From Ben Hanscom, a Stephen King character
Trips Pharmacy, LLC	DE	5776042	Corporation Service Company	From Captain Trips, a virus that exterminates most the human population in The Stand, a Stephen King novel.
Delain Pharmacy, LLC	DE	5776044	Corporation Service Company	From Delain, a mythical Stephen King domain.
Creed Pharmacy, LLC	DE	5776045	Corporation Service Company	From Louis Creed, the main character in a Stephen King novel.
Odetta Pharmacy, LLC	DE	5776046	Corporation Service Company	From Odetta Holmes, a recurring Stephen King character
Hemingford Pharmacy, LLC	DE	5776047	Corporation Service Company	From Hemingford Home, a Stephen King location.
Ludlow Pharmacy, LLC	DE	5776048	Corporation Service Company	From Ludlow Maine, a Stephen King location.
Crandall Pharmacy, LLC	DE	5776050	Corporation Service Company	From Jud Crandall, a Stephen King character.
Sheldon Pharmacy, LLC	DE	5776053	Corporation Service Company	From Paul Sheldon, a major Stephen King character.
Freemantle Pharmacy, LLC	DE	5776054	Corporation Service Company	From Abagail Freemantle, a major Stephen King character.
Revlowe Pharmacy, LLC	DE	5776055	Corporation Service Company	Presumably from the Reverend Lowe in the Cycle of the Werewolf.
French Landing Pharmacy, LLC	DE	5776058	Corporation Service Company	The location in Black House, a Stephen King novel.
Wilkes Pharmacy, LLC	DE	5776059	Corporation Service Company	From Annie Wilkes, a Stephen King character.
Henreid Pharmacy, LLC	DE	5776060	Corporation Service Company	Possibly from Lloyd Henreid, a minor Stephen King character.
Beaumont Pharmacy, LLC	DE	5776062	Corporation Service Company	From Thaddeus Beaumont, another Stephen King character.
Sawyer's Pharmacy, LLC	DE	5776064	Corporation Service Company	From Jack Sawyer, another Stephen King character.
DH Stark Pharmacy, LLC	DE	5776065	Corporation Service Company	Possibly short for Dark Half from the novel of the same title. George Stark is the major character.
Shardik Pharmacy, LLC	DE	5776066	Corporation Service Company	Shardik is one of the twelve guardians of the Beams that hold up the Dark Tower (again a Stephen King reference).
TCM Pharmacy, LLC	DE	5776067	Corporation Service Company	We are fairly sure this is associated - but have not worked out the link.
Burlingame Pharmacy, LLC	DE	5776070	Corporation Service Company	Jessie Burlingame is a major Stephen King character.
Lauder & Cross Pharmacy, LLC	DE	5776071	Corporation Service Company	Try these names... http://stephenking.wikia.com/wiki/Harold_Lauder and http://stephenking.wikia.com/wiki/Nadine_Cross
Claiborne Pharmacy, LLC	DE	5776072	Corporation Service Company	Dolores Claiborne is a Stephen King novel.
Edgecombe Pharmacy, LLC	DE	5776073	Corporation Service Company	From Paul Edgecombe, who used to run Death Row in a Stephen King novel.
Georgia Pines Pharmacy, LLC	DE	5776074	Corporation Service Company	Georgia Pines is a retirement home in Stephen King novels.
Garraty Pharmacy, LLC	DE	5776075	Corporation Service Company	From Ray Garraty, another Stephen King character.
Cold Mountain Pharmacy, LLC	DE	5776076	Corporation Service Company	The Cold Mountain Penitentiary is where Paul Edgecomb ran death row.
Coffey's Pharmacy, LLC	DE	5776078	Corporation Service Company	John Coffey is another Stephen King character.
Stillson Pharmacy, LLC	DE	5776079	Corporation Service Company	Steve Stillson is the President of the United States in a Stephen King novel.
Rainbird Pharmacy LLC	DE	5776080	Corporation Service Company	John Rainbird is a Vietnam Veteran in a Stephen King novel.
Longmont Pharmacy, LLC	DE	5776083	Corporation Service Company	Longmont VA is a location in the Stephen King novel, The Shop.
Dawes Pharmacy, LLC	DE	5776086	Corporation Service Company	Barton George Dawes is another Stephen King character.
Castle Rock Pharmacy, LLC	DE	5776088	Corporation Service Company	Castle Rock Maine is a location of paranormal activity. I guess like a Valeant pharmacy.
The Shop Pharmacy, LLC	DE	5776089	Corporation Service Company	The Shop is a secret Government Agency in Stephen King novels. I guess this is a secret Valeant agency.
Cambers Pharmacy, LLC	DE	5776096	Corporation Service Company	Joe Cambers, a Stephen King character runs an auto-repair shop in Castle Rock. Probably another paranormal shop.
McGee's Pharmacy, LLC	DE	5776099	Corporation Service Company	Charlie McGee, a Stephen King character, has pyrokinetic powers - perhaps they include ripping off insurance companies.
Juco Pharmacy, LLC	DE	5776103	Corporation Service Company	A nickname for Joe Cambers rabid family dog.
Roland's Pharmacy LLC	DE	5776108	Corporation Service Company	Roland Deschain, a major Stephen King character.
Tower Pharmacy, LLC	DE	5776110	Corporation Service Company	Possibly a reference to The Dark Tower, a Stephen King novel.
Hawkmarten Pharmacy, LLC	DE	5776111	Corporation Service Company	We think this is one of the many aliases of Joe Flagg. Suggestions accepted.
Carrietta Pharmacy, LLC	DE	5776115	Corporation Service Company	The full first name of Carrie, of the infamous Stephen King novel.
PBG RX Pharmacy, LLC	DE	5794828	Corporation Service Company	We have not found the reference here. The registration details make us think it is related.
Decker Pharmacies, LLC	DE	5794834	Corporation Service Company	Another reference to Decker.
French Landing Pharmacies, LLC	DE	5794836	Corporation Service Company	Another reference to French Landing.
NC3 Pharmacies, LLC	DE	5794839	Corporation Service Company	See the above chess reference.
C-K Pharmacy, LLC	DE	5794840	Corporation Service Company	See the above chess reference.
ELO Pharmacies, LLC	DE	5794842	Corporation Service Company	See the above chess reference.
Roland's Pharmacies, LLC	DE	5794844	Corporation Service Company	See the above reference to Roland Deschain.
Hemingford Pharmacies, LLC	DE	5794849	Corporation Service Company	See the above reference to Hemingford Home
Flagg Pharmacies, LLC	DE	5794852	Corporation Service Company	Joe Flagg again.
Overlook Pharmacies, LLC	DE	5794854	Corporation Service Company	The hotel in the Shining again. Do we see a recurring theme.
Fischer Pharmacy Holdings LLC	DE	5805160	Corporation Service Company	Surely a reference to Bobby Fisher, world Chess Champion

We are just playing with one State here.

There are pharmacies in other states. And they are all we think related to Valeant.

But here is the gem. The registration of false pharmacies continued AFTER Philidor was exposed and after Valeant said that they would stop doing business with Philidor.

And the people on registration documents are also often on the pay roll of Valeant (not Philidor).

I hope the longs can explain that inconvenient fact away - because it is not obvious how you do that.





John