NEW YORK, Sept 13 Noted value investor Bill
Miller said on Tuesday that Valeant Pharmaceuticals
International Inc, the troubled Canadian drugmaker, is
one of his top holdings, with the company's expected cash flows
making the stock attractive.
Valeant's market value has fallen by some 90 percent in the
last year as the company's drug pricing and other business
practices prompted investigations by multiple U.S. government
agencies and by Congress.
"We think with Valeant right now, it's a completely
different company," Miller said at the CNBC Institutional
Investor Delivering Alpha Conference in New York. "It's just a
slow-growth specialty pharma company that will generate a lot of
free cash and you should be able to make, I think, 25 to 30
percent on Valeant over the next five years."
Miller, the founder and chairman of LMM, said he sees no
realistic probability of government action to control drug
pricing, saying there are just "lots of hearings, lots of
Valeant came under fire after it raised the price of two
heart medications, Isuprel and Nitropress, by about 720 percent
and 310 percent, respectively, after acquiring the drugs in
Miller estimated Valeant's free-cash flow yield at 25 to 30
percent. "The market believes the risk is super high and I just
think the free cash flows will be there."
Valeant first came under scrutiny from New York prosecutors
last October over its drug pricing and distribution. Media also
reported at the time that it used pharmacy Philidor Rx Services
to overcome insurer rejections to reimbursing its medications,
with Philidor resubmitting claims to insurers until they were
On the broader stock market, Miller said his so-called best
idea was to go long on the Standard & Poor's 500 and short on
the 10-year Treasury note.
"You're talking a 6 percent rate of return on stocks versus
1.5 percent return on the 10-year Treasury," Miller said. "It
strikes me that as I think (hedge fund investor) Paul Singer
said, 'Treasuries are hardly a risk-free asset,' and I think the
environment right now is the exact opposite of September 1987."
(Reporting by Jennifer Ablan; Editing by Leslie Adler)