The hedge fund of Bill Ackman has sold some of its shares in Valeant Pharmaceuticals, the embattled drug company that Mr Ackman earlier in 2015 went to considerable lengths to defend.

The hedge fund, Pershing Square Capital Management, said in a regulatory filing that its stake in Valeant was now equivalent to 8.5 per cent of the company's shares. In November, Pershing said that it had bought shares that increased its stake in Valeant to 9.9 per cent of the company, from 5.7 per cent. In the sale announced Thursday, Pershing Square disposed of roughly five million shares.

The hedge fund said in the filing that it sold the shares to “to generate a tax loss for their investors”. In other words, Pershing’s losses on the Valeant shares can be used to offset taxes that might be owed on the fund’s other positions.

Even so, by selling the shares, Pershing loses the opportunity to book any future gains on them. This suggests that Mr Ackman may not expect the shares to reach the price at which he purchased them any time soon. The sale sounds a downbeat note for Mr Ackman and Pershing Square, whose main public portfolio was down 19.5 per cent in the year to December 22nd.

Valeant’s shares have fallen 61 per cent from the high they reached in the summer, although they have climbed considerably from the lows they hit in November.

Valeant’s business model has come under fire on several fronts in recent months. It drew criticism for sharply raising the prices of some old drugs after acquiring them. And Valeant has faced scrutiny over its relationship with Philidor Rx Services, a mail-order pharmacy that dispensed some of Valeant’s expensive dermatology drugs.

Valeant cut its ties to Philidor in October after questions were raised about the practices.

Earlier this week, Valeant said that Michael Pearson, its chairman and chief executive, was on medical leave and that a team of executives would run the company while he was away. Valeant earlier said Pearson had been hospitalised and was being treated for a severe case of pneumonia.

Mr Ackman was not available to comment, and a company spokesman declined to say anything beyond the filing.

For Mr Ackman, 2015 is sure to be one of his worst years ever, in part because of the heavy losses in Valeant. The 19.7 per cent fall in Pershing’s main public portfolio marks a dramatic about face from last year’s 40 per cent gain, which ranked Mr Ackman among the hedge fund industry’s best performers.

The 2014 gain was fueled mainly by an increase in drug company Allergan’s shares as Mr Ackman pressured it to sell itself to Valeant. Allergan sold itself to Actavis instead and in March of 2015,

Mr Ackman said he had made a sizable bet in Valeant. But by late August, Valeant had gone from being one of Mr Ackman’s biggest winners to being his largest loser, costing him and his investors, including state pension funds, billions in losses.

While Mr Ackman criticized Valeant for having a public relations problem, the activist investor stuck by the company, upping his stake significantly. Valeant’s shares closed the year down 22 per cent, at $101.67, at less than half the year’s high of $260 reached in early August. – Copyright New York Times 2016/Reuters