Valeant Pharmaceuticals’ Acquisitions Should Please Jeff Ubben

Valeant Pharmaceuticals’ share price has quadrupled since 2008 thanks to its growth-by-acquisition strategy.


Another week, another acquisition for Valeant Pharmaceuticals International.

The Canadian drug company announced on Monday that it is buying Medicis Pharmaceutical for about $2.6 billion, making the combined company a major player in the dermatology business.

This is Valeant’s tenth acquisition this year alone, excluding minority investments. What’s more, Valeant, which retained its name when it was acquired by Biovail in 2010, has made roughly 50 acquisitions since Michael Pearson became chief executive officer in 2008.

The growth-by-acquisition strategy has certainly been applauded on Wall Street. Since 2008 Valeant’s stock has roughly quadrupled.

In fact, its stock is up in the midteens on Tuesday, further underscoring investors’ support of Valeant’s acquisition strategy, given that the stock of the acquirer more often falls on the day a deal is announced.

One person who will be happy with this success is ValueAct’s Jeff Ubben. The San Francisco hedge fund manager is known for owning between a dozen and 18 stocks at one time. Typically, these are under-performing companies that Ubben and his team believe are worth much more if they would, say, shed some businesses or bring in new management or focus on certain core businesses. Frequently, ValueAct will play a major role in recruiting new management.

Since taking its initial stake in 2006, the firm helped Valeant identify major cost savings and sell its pharmaceutical pipeline so it could focus on its branded generics business, which was less volatile. This enabled the company to slash R&D by more than half.

In 2008, ValueAct also recruited Pearson from McKinsey, where he had spent 23 years, to serve as chairman and chief executive officer of Valeant.

Today Valeant is ValueAct’s third-largest position in its $6.8 billion U.S. equity portfolio. Several years ago it was the hedge fund firm’s largest holding.

ValueAct is also Valeant’s third-largest shareholder.

G. Mason Morfit, a partner with ValueAct, currently sits on Valeant’s board of directors and in the past so did ValueAct’s Brandon Bozet.