Mr. Ackman closed his presentation by quoting Mr. Buffett, “Be fearful when others are greedy, and be greedy when others are fearful.”

Valeant has quickly become the most interesting story on Wall Street today. In this era of increasing shareholder activism, here is a pharmaceutical company shaped into the image of a hedge fund by a prominent activist investor. In 2009, that investor, ValueAct Capital, put together a creative pay package that required Valeant’s chief executive, J. Michael Pearson, to invest a substantial amount of money into the company, but promised rich equity-based compensation should the stock price appreciate. In other words, like any good hedge fund manager, Mr. Pearson put his own wealth at risk while getting exposure to tremendous upside should he create value for his investors.

Since Mr. Pearson took the helm, Valeant has focused more on allocating its capital than researching and developing new drugs. It acquired dozens of companies, slashed overhead and research and development and raised prices to maximize profits. At the same time, Valeant borrowed heavily, and actively repurchased its own shares. This strategy ruffled a lot of feathers in the pharmaceutical industry, but Valeant shareholders rejoiced. According to FactSet, the stock was the second only to Apple among widely held hedge fund investments at the end of June.

Valeant stock has since tumbled. The hedge fund darling has become the target of several prominent short-sellers, one of whom called Valeant the next Enron. At the center of the claims is a specialty pharmacy called Philidor Rx Services, which reportedly used improper sales tactics — including changing doctors’ prescription orders — to secure payment for Valeant products from health insurers. Although Valeant employees are said to have worked at Philidor’s offices since the company’s early years, and even though Valeant paid $100 million for an option to purchase Philidor for $0, the company insists it does not control the pharmacy and is not liable for its misdeeds. Last Friday, after a week of scrutiny from regulators, journalists and short-sellers, Valeant announced it would sever ties with Philidor, forcing the pharmacy to cease operations.

When Philidor is banished to the ranks of extinct businesses, it will join a company called the American Express Field Warehousing Corporation. The warehousing subsidiary of American Express collapsed after it unwittingly guaranteed the soybean oil inventory of Anthony De Angelis, whose background was so shady that his business could not even open a regular bank account. The scandal blew up in spectacular fashion in 1963, when Mr. De Angelis used warehouse receipts stamped with the American Express guarantee to open margin-trading accounts in a reckless attempt to corner the market in soybean oil. When Mr. DeAngelis’s trade turned against him, it sank a brokerage firm with 20,000 customers holding half a billion dollars of stocks, and shut down the Produce Exchange for an entire day.