In the letter they state that [Valeant] "expect the Salix business to represent approximately 20% of our 2016 revenue and expect double-digit script growth and corresponding revenue growth trends to continue".
This surprised me. Valeant sales are over $10 billion per annum. They were 2.695 billion in the last quarter (including sales from Salix).
If organic sales growth is 20 percent and the sales grow double-digit then Salix sales should be at least $2.2 billion during 2016.
During the last year Salix was a public company (2014) Salix revenues were $1.13 billion.
I guess they can square this circle with massive price increases for Salix products. However in the same letter Mike Pearson denies that Valeant's growth is dependent on price increases for pharmaceuticals.
Mr Mike Pearson, I do not believe you.
What would make Mr Pearson more plausible?
There are numerous instances where I have found myself disbelieving Valeant's numbers and PR spin. If you want a really good analysis read AZ Value's wonderful blog. However I keep coming down to people and their personal credibility. You catch way too many strange, even implausible numbers at Valeant.
And there are reasons to distrust the people more generally.
It would be better if the Chair of the Audit and Risk Committee of the board did not have close association with past securities frauds. Let me introduce you to Norma Provencio.
Ms Provencio is founder of Provencio Advisory Services, a healthcare consultancy. Ms Provencio has been involved with Valeant for some time. She was on the board of legacy Valeant and signed the original offer letter to Mike Pearson in 2008.
Searching the SEC database for "Provencio Advisory Services" not in reference to Valeant turns up a relationship with Signalife (aka Heart Tronics) back in 2007:
http://www.sec.gov/Archives/edgar/data/810365/000081036508000002/sgnsb2foryaglobalsedav5final.htm (p. 19)
And if we go way back, it turns out she participated in the same financing for a predecessor company to Signalife, Recom Managed Services, as an attorney named Mitchell Stein in 2003:
"On May 15, 2003, we completed the first tranche of a private placement pursuant to which we sold 82,667 units to Mr. Mitchell Stein, SJ Investments and Ms. Norma Provencio at $3 per unit for cash amounting to $248,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants each investor will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004."
Ms Provencio was a director of Signalife (aka Heart Tronics), which is not mentioned in her official Valeant biography. This is a worrisome omission.
Mitchell Stein, the controlling shareholder and Provencio's co-investor got into a bit of trouble and is now serving a lengthy prison sentence.
Here's a mention (including an email from Provencio) in a filing by the defendant Mitchell Stein in his sentencing hearing, claiming that she knew about the transactions at issue:
Ms Provencio wasn't charged, but she was involved since the early days of the company, coming in alongside its principal mastermind and serving as a Director, Audit Chair, and consultant.
This seems like a meaningful omission from her biography and raises questions about her suitability as audit chair for a company as complex and acquisitive as Valeant.
We do not have any affidavits Ms Provencio made in her defence in the Signalife matters - though we have affidavits from other board members who ran the defence that Mr Stein controlled all aspects of Signalife and hence they (as directors) were not responsible. [Kindly this is the "asleep at the wheel" defence.]
Ms Provencio was also in the board of International Aluminum Corp, which went bankrupt at some point back in the mid-2000s (and is not mentioned either).
Approach to relevant Congressional staffers
There is discussion in the news about Valeant possibly receiving subpoenas concerning drug price hikes.
If the congressional staffers concerned want more material on Valeant which helps them target their subpoenas then I can offer some low-level assistance.