Valeant backer Ackman tells investors hard times will pay off

Hedge fund mogul Bill Ackman told his investors to fasten their seat belts for a bumpy ride as he dug in his heels with his Valeant Pharmaceuticals stake.

Ackman’s now $15 billion Pershing Square hedge funds have lost more than $2 billion on paper on the troubled pharmacy giant — the largest paper money-loser in Ackman’s long career.

But, the activist investor said, the “bumpier” ride of Pershing Square is the only way to achieve its high rates of return over time. Pershing Square has gained about 15 percent annually since inception in 2004, one of the industry’s best performers.

But even 2014, when he was up about 40 percent, must seem like a distance memory to Ackman, who was down as much as 19 percent just days ago with sizeable, high-profile hits to his reputation — and portfolio.

Ackman, in a quarterly call to investors Monday morning, talked up Valeant for the second time in two weeks. Last week, he said, his team polled more than 50 dermatologists who confirmed they liked Valeant products and the specialty pharmacies that help patients get them the drugmaker’s products — what the doctors called “necessary allies” against their adversaries, the insurance companies.

Valeant’s business is under assault from short sellers, prosecutors and members of Congress. The stock has fallen more than 60 percent from its peak and is now only 12 percent of Ackman’s Pershing Square hedge funds.

Valeant gained 4.5 percent Monday to close at $85.41.

Ackman said he “guessed” Valeant would announce a new specialty pharmacy arrangement in a conference call it’s holding Tuesday morning.

Just 10 days ago, Valeant ended its controversial relationship with specialty pharmacy Philidor after several pharmacy benefit managers said they would no longer do business with the mail-order pharmacy, given its alleged improprieties.

Valeant’s business prospects haven’t materially changed, and cash flow predictions over the next 10 years remain the same, Ackman argued, trying to convince listeners he thought the shares of the Canadian company are a bargain.

The price hikes that have become so controversial will likely end, Ackman said, adding that he doesn’t think Valeant needs them. He didn’t elaborate on why the company, then, waded wilfully into that public relations swamp.

Last week, Ackman wrote a letter to Valeant CEO Michael Pearson, affirming his support for the executive — but the billionaire investor didn’t mention Pearson by name in Monday’s call.

Instead, he said, “If there are members of management somehow involved in something inappropriate I’m sure it will be addressed by the board.”