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Charlie Munger Isn't Done Bashing Valeant

Charles Munger, vice chairman of Berkshire Hathaway.
  • In weekend interview, he calls the drugmaker `deeply immoral'

Charles Munger saw it coming, and now he’s shaking his head.

Months before Valeant Pharmaceuticals International Inc. tumbled under attack from short sellers, Munger told investors in Los Angeles the company reminded him of the excesses of the 1960s conglomerate craze. “I’m holding my nose,” Warren Buffett’s longtime business partner said.

Turns out, those remarks were just the start of his concerns.

In an interview Saturday, Munger tore anew into the besieged drug company, calling its practice of acquiring rights to treatments and boosting prices legal but “deeply immoral” and “similar to the worst abuses in for-profit education.” In his role as chairman of Good Samaritan Hospital in Los Angeles, Munger said, "I could see the price gouging.” And speaking as a storied value investor, he said, its strategy isn’t sustainable: “It’s deeply wrong.”

Once a high-flying stock -- and a darling of star money managers like Bill Ackman -- Valeant has slid more than 60 percent since its peak in August. A short-seller accused it of using a mail-order pharmacy, Philidor RX Services LLC, to inflate sales and engage in accounting tactics reminiscent of Enron Corp., the power trader that collapsed in 2001. Lawmakers are examining how Valeant set higher prices for medications.

The company denied the short-seller’s allegations in a conference call on Oct. 26 and said Friday it would sever ties with Philidor. It also has said that price increases for treatments are often whittled down in negotiations with insurers.

‘Holding My Nose’

“We operate our business based on the highest standard of ethics, and we are confident in our compliance with applicable accounting rules, regulations and laws,” Laval, Quebec-based Valeant said in an e-mailed statement Sunday. “Our commitment is to the patients who use our drugs, the doctors who prescribe them, our partners who make them available across the country, and to our shareholders.”

Munger’s stance has extra significance, because some of the drugmaker’s largest shareholders follow the style of investing that he and Buffett, 85, popularized. Ackman frequently expresses his admiration for their firm, Berkshire Hathaway Inc. And Valeant’s largest investor, Ruane Cunniff & Goldfarb, which runs the Sequoia Fund...