Wall Street marveled Tuesday as troubled Canadian drugmaker Valeant Pharmaceuticals (VRX) watched more than half its market cap walk out the door amid a mass selloff, pulling down a host of Big Pharma names.
Risk-prone investors, generally willing to ride out troughs of pharmaceutical stocks in their quest for higher yields, seemed to finally have had enough with Valeant when the company revised its 2016 outlook and whiffed on earnings, prompting shareholders to flee in droves, as Real Money reported. Shares fell more than 51% on the day.
The beleaguered drugmaker has been hounded by a variety of pressures, from a congressional probe into its drug pricing and an SEC investigation into its revenue bookkeeping to, most recently, a charge of "predatory pricing" by Democratic presidential front-runner Hillary Clinton.
But one man who's been undeterred by the turbulence in Valeant shares appears to be Pershing Square's Bill Ackman, whose hedge fund recently appointed its vice chairman to Valeant's board of directors.
"If you know Bill Ackman, he'll never say he's wrong," Citron Research activist investor Andrew Left said in a phone interview with Real Money. "You are talking impossibility. The stock will go to zero and he'll still be right and everyone else is wrong."
The S&P 500 traded fairly evenly on the day, dipping about 0.5% as crude oil slipped again. Crude prices dropped 2% to $36.44 a barrel, based on U.S. benchmark West Texas Intermediate.
Endo (ENDP) led the biggest losers on the day in the index, falling nearly 23% in the wake of the bleak global outlook embedded in Valeant's earnings call with analysts.
Other major pharmas to plunge on the day included Horizon Phara (HZNP), which fell nearly 14%, and Mallinckrodt (MNK), whose shares dropped 14.5% and may represent an even more dangerous position than Valeant, Left told Real Money's Carleton English.
Mallinckrodt may be in even worse shape than Valeant, Left said, arguing that one of its anti-seizure drugs epitomizes "price gouging."
"Mallinckrodt is squeaking by without anyone talking about it," Left said. "Mallinckrodt makes Valeant look like a bunch of choirboys."
-- Carleton English contributed to this report