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Battered Valeant stock worth double the current price, value investor Bill Miller says

Value investor Bill Miller told CNBC on Tuesday that embattled drugmaker Valeant Pharmaceuticals will clean up its act and its stock could double in the next two to three years.

Miller said on "Squawk Box" the Canadian company is a slow-growth specialty pharmaceutical company that for the next few years won't be doing any acquisitions.

"They'll be doing disposals," Miller said. "But they'll be cleaning up the business. They'll be putting money in [research and development]. You know, products will get approved. I think it's going to be a completely different business model from what it had before."

The drugmaker, which has been accused of fraud and price gouging, posted poor earnings and slashed its profit forecast last week. The company has suffered along with the entire industry as pressure from regulators about drug prices intensifies. The added heat has upended business models dependent on raising prices, although the environment could change under a Trump administration.

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The company has recently been trying to sell off its noncore assets to reduce its acquired mass amounts of debt. Miller said the heavily indebted pharma company could easily double, even triple its current price. The investor suggested that the company focus on what most drugmakers don't — free cash flow.

"The free cash flow there is running close to $2 billion and that coupled asset sales will enable them to delever fairly quickly over the next few years," he said. "We'd expect something in the order of $5 [billion] to $10 billion of disposals in the next 12 months and then another couple of billion in free cash flow."

Miller is founder, chairman and CIO of Baltimore-based LMM, a partially owned subsidiary of Legg Mason with $2 billion in assets under management.