Billionaire investor William Ackman walked away from Valeant Pharmaceuticals International (VRX.TO) on Monday, with a roughly US$3 billion loss after he sold his entire stake in the ailing drug company despite trying to rescue it for some 18 months.

Ackman’s Pershing Square Capital Management disclosed the exit in a press release after markets closed. The New York-based fund said its position accounted for up to three per cent of Pershing's funds, but the investment "required a disproportionately large amount of time and resources." 

Pershing also announced Ackman and Vice-Chair Steve Fraidin would step down from Valeant's board of directors after its annual general meeting. 

"We appreciate the support and guidance that Bill and Steve provided during a challenging time," Valeant CEO Joe Papa wrote in a statement. "Serving on the Board of a company undergoing a transformation requires a significant commitment and we accept their decision not to stand for re-election to the Board of Directors.  We are fortunate to have the benefit of a talented and experienced group of directors who share our strategic vision and are dedicated to turning the company around for the benefit of all shareholders and stakeholders."

Valeant's New York-listed stock was down 10.9 per cent  as of 9:35 a.m. ET. 

“We elected to sell our investment and realize a large tax loss which will enable us to dedicate more time to our other portfolio companies and new investment opportunities,” Pershing said in a statement. "CEO Joe Papa and his team have done an excellent job refocusing and setting a new course for the company. We wish the company and its extremely hard working, dedicated and loyal employees great success in the future."

Pershing Square became one of the firm's biggest investors in 2015 when it sunk some US$3.2 billion into the company. Ackman bought into Valeant when the stock was trading near US$190 a share and he watched it surge to US$260 a share during the summer of 2015.

But governmental scrutiny of the company's pricing policies coupled with scandals surrounding Valeant's specialty pharmacy unit, Philidor, caused the stock price to sharply tumble after August 2015.

Now Ackman walks away with about US$221 million, having sold his entire stake of 18.1 million shares after months of turmoil that have left his fund with two years of double-digit losses and a tarnished reputation.

“We don’t think that Bill Ackman’s withdrawal or capitulation here indicates that there’s some major shoe to drop that other investors don’t know about,” said Ram Selvaraju, senior healthcare analyst at Rodman & Renshaw, in an interview with BNN.

“From our perspective, Pershing Square got involved in Valeant initially because of the possibility of acquiring Allergan back in 2015. When that didn’t go their way they effectively interfered to a negative extent in the operational direction of the company – forced the company to overreach, effectively overextending itself.” 

During his one year on the board, Ackman replaced Valeant's CEO, refreshed the board with 10 new directors and worked to pay down some US$2.7 billion in debt through the sale of non-core assets. Still, the company's stock price kept sinking despite hopes that a merger deal might be around the corner. As of the end of trading Monday, Valeant’s stock was down almost 94 per cent from March 2015, when Pershing first announced its stake. 

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As of the end of 2016, Valeant had US$29.8 billion in long-term debt.

“Valeant has been sitting there with a single-B rating for quite a while now,” said David Driscoll, president and CEO of Liberty International Investment Management Inc., in an interview with BNN. “In the last month or so, while high-yield bonds have been rising in price, Valeant’s has been going the other way. And the bond market can usually signal something much stronger than what the equity market can understand.”

Valeant’s stock price has kept sinking despite the lingering hopes that a merger deal might be around the corner. As of the end of trading Monday, Valeant’s stock was down almost 94 per cent from March 2015, when Pershing first announced its stake.

“This company played the momentum game incredibly well,” said Lyle Stein, senior portfolio at Vestcap Investment Management, in an interview with BNN. “Unfortunately, the bubble popped. These momentum-driven stocks – the hedge fund community being part of it – that’s what you get at the end of the story.”

It's the second high-profile exit by Pershing in the last year. Last August it announced it sold its shares in Canadian Pacific Railway after engineering a proxy campaign and turnaround at the railroad company.