The wealth effect orchestrated by former Fed Chairman Ben Bernanke has helped send financial markets to record highs. The Dow Jones (DIA) was around 8,000 when President Obama took office and exceeded 26,000 since President Trump took the helm. Certain drug companies took advantage of the liquidity in the market by rolling up other drug companies, cutting R&D and hiking drug prices. Valeant (VRX), Mallinckrodt (MNK) and Allergan (AGN) and Martin “Pharma Bro” Shkreli’s Turing Pharmaceuticals delivered strong top line growth through acquisitions and were rewarded with high valuations.
In 2015 Valeant placed a moratorium on acquisitions and vowed to cut debt via asset sales. The company has pared debt by about $6 billion, yet the company remains financially impaired. According to Shocking Exchange, who has been following the company for years, Valeant is insolvent. On April 4th the Shock Exchange explained Valeant’s insolvency in detail. He walked investors through Valeant’s change in strategy from a pharma roll-up to becoming a traditional drug company and how that led to its insolvency.