Valeant's acquisition strategy has long been rewarded by investors. The stock has risen 850 percent in the last five years, giving Valeant a market value of $77 billion. Its approach has been described as buy and burn, "buying mature products and cutting all the support under them," Gal said.
"The big bet Pearson brought to the financial market is this concept that you can cut a lot of costs from a drug company and the existing drugs will keep on selling," Gal said. "He made a ton of money that way."
Pearson applied that strategy to Dendreon. The once darling of the biotech industry declared bankruptcy late last year after failing to sell its prostate cancer drug, Provenge, profitably. Valeant bought it in February for $415 million.
"We right-sized the company," Pearson said. "Though it was a small company, it was being run with a big company mindset."
The first step was eliminating the costs associated with Dendreon being publicly traded: It no longer needed a chief financial officer, or heads of IT and investor relations, Pearson said. Then it came to reducing costs associated with manufacturing: eliminating senior management positions and a "big purchasing department, which we didn't need—we could use our own," Pearson said.
Valeant also identified contracts with some suppliers where it determined Dendreon had been overpaying, and found that an automated system for manufacturing was actually more expensive than paying people to do the work.
"They had about a 50 percent gross margin," Pearson said. "Our gross margins are now up into the high 60s, low 70s."
Valeant's stock is up 36 percent since the Dendreon acquisition was approved.