Scandal-plagued Valeant CEO focuses on damage control

Valeant CEO J. Michael Pearson

In the wake of its scrapped relationship with under-fire specialty pharmacy Philidor, Valeant ($VRX) is working to develop a new access program for dermatologists--something it thinks it can do within the next 90 days. But it'll take a lot longer than that for the dermatology business to recover.

That business won't be "performing as it has historically" until the second half of next year, CEO J. Michael Pearson told investors on a conference call Tuesday.

In the meantime, Valeant's strategy is to hang onto volume and make sure doctors don't change their prescribing patterns, Pearson said--even if that means much lower prices. Last week, Valeant covered the cost for all prescriptions previously filled by Philidor, which will "obviously have an impact for the rest of the quarter."

"We'd rather take a short-term hit to protect our business for next year and beyond," Pearson said.

But the company is confident a new specialty pharma arrangement--which it's working to set up now--will help get things back on track. It's also "working hard" to reach out to payers and other distribution partners--something Pearson admitted he hasn't spent a lot of time doing in the past. And both he and company group chairman Ari Kellen have been traveling the country to meet with dermatologists, Pearson said, and "the response has been quite good."

"Most of these doctors really appreciate all the investment we've made in their profession over the last couple years," he said.

But Valeant's dermatology products aren't the only ones suffering right now. Before controversy enveloped Philidor--which short seller Citron Research accused Valeant of using to inflate its top line--sizeable price increases on a pair of heart meds Valeant purchased this year from Marathon Pharmaceuticals drew ire from politicians and lawmakers.

To smooth things over, Valeant is offering "discounts that are significant" on those meds, Pearson said, noting that they'd take a quarterly hit, generating about 20% less than they did in Q3.

Still, thanks to the drugmaker's "decentralized" business model, there are plenty of other bright spots for Valeant, Pearson pointed out. Its Salix business, for one, is seeing strong script growth; key med Xifaxan reached new heights last month partly in thanks to a DTC campaign.

Pearson said the past few weeks "have been a painful learning experience," and he admitted that failing to "take the time to listen to what the broader world outside your company is saying" has "been a mistake." But the company is "going to survive," he reassured investors.

"Our cash flows are strong and our momentum is good. We just have to get through these issues," he said.

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