Warren Buffett is not a fan of Valeant Pharmaceuticals.
And he never was.
At Berkshire Hathaway’s annual meeting on Saturday, Buffett expressed disappointment over the direction of the company and called it a “Wall Street scheme.”
“In my view, the business model of Valeant was enormously flawed,” said Buffett.
Buffett’s partner Charlie Munger, who last year made headlines with comments about the company, also chimed in.
“Valeant, of course, was a sewer,” said Munger, adding that the directors deserve “all the opprobrium they are getting.”
Valeant has had a disastrous six months with scandals involving its practice of purchasing drug companies and then raising the prices on their products, a mess of a financial report tied to shady revenue reporting, and patient assistance programs that are being investigated in multiple states.
All of these problems have led to the removal of the company’s top executive, an investigation by the US Senate, and a 70% decline in the company’s stock price.
Buffett also said that he was approached by multiple people asking if he wanted to in Valeant and urging Buffett to meet former Valeant CEO Michael Pearson. Buffet said he declined to do either of those things, and was wary of the company from the start.
There were also some pointed words about management.
“If you’re looking for a manager you want someone who is intelligent, energetic, and moral,” said Buffet. “But if they don’t have the last one, you don’t want them to have the first two.”
The question also asked about Sequoia Fund, a mutual fund Buffett has been associated with for some time that had accumulated a stake in Valeant. (One of Sequoia’s founders, Bill Ruane, was a Buffett confidant from way back.)
Buffett said that it was unfortunate that Sequoia took such a large position in Valeant and that the manager that selected the investment has since been fired.