Link: http://www.reuters.com/article/2015/10/26/valeant-pharmacies-philidor-idUSL1N12Q1PJ20151026

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Here is a story with comment from me on consequences raised by the
company’s unusual and non-transparent approach to the pharmaceutical
business.

In our fund work, we will see companies with unusual business models. We
probably should ask ourselves whether the companies have good reasons for
unusual models.

The unusual models could be the source of competitive advantage, at least
for a while. They also could be the result of the founders not knowing
much about the industry they are in. The unusual models could be a vehicle
for making it difficult to detect weak core performance or something else a
founder doesn’t want us or someone else to detect.

The flip side of unusual models – that is, the other side of the potential
for the model to create value – is the added risk from the difficulty of
assessing the model and the results it apparently produces.

Entrepreneurs and investors should think carefully about the first and
second order effects of unusual models. If a founder can explain the
benefits of the model, I am all for it. If not, I wonder what is up.

Reuters:

http://www.reuters.com/article/2015/10/26/valeant-pharmacies-philidor-idUSL1N12Q1PJ20151026

Yahoo Finance:

http://finance.yahoo.com/news/pilot-profit-maker-valeants-pharmacy-225614598.html

Best regards.

_____________________
Erik Gordon
Ross School of Business
University of Michigan
Ann Arbor, Michigan