When Paul Campanelli was elevated to Endo Pharmaceuticals' CEO seat in September 2016, he took over at a troubled time for the drugmaker after a series of ill-conceived acquisitions and catastrophic guidance cuts. Now, Endo faces opioid overhangs and generics pricing headwinds stateside––and it won't have Campanelli guiding the ship.
Endo said Campanelli would step down from his CEO post ahead of its third-quarter earnings release Tuesday, leaving analysts confused about the drugmaker's timing and worried about the fallout from Campanelli's departure.
Campanelli is only the most recent in a series of generic execs who've left or lost their jobs in the face of massive opioid liabilities, pricing headwinds stateside and pressure for industry players to opt for major buyouts a la Mylan's deal with Pfizer's Upjohn.
According to Endo's transition plan, Campanelli will remain on board as chairman while his replacement is found. Current chair Roger Kimmel will move over to the role of senior independent director, and board member Sharad Mansukani will step down after taking a board seat at another company.
Campanelli re-upped his contract with Endo in April, making his departure a bigger surprise and a bigger challenge "given how instrumental he has been in steering the company through the last several years, which have included the mesh settlements, the 2016 generic downturn and ongoing opioid litigation," RBC Capital Markets analyst Randall Stanicky said in a Monday note to investors.
In an earnings call with investors, Campanelli said he was leaving Endo in a better place than he found it and saw a bright future ahead with the company's diversified portfolio––if a strong replacement is found.
"At this stage of the game, we've got an exciting pipeline and a portfolio that is going to fuel this company for the long-term," he said. "So it's going to be an exciting opportunity, but we're going to need somebody who can look across multiple segments and also medical aesthetics."
Stanicky pointed out that Campanelli chose to depart as Endo works through thousands of opioid lawsuits that have already snared tentative multibillion-dollar settlements from other drugmakers. Those lawsuits, as well as pressure from stateside generic pricing headwinds and massive merger deals in the generics business, have led to C-suite turnover at some of the industry's biggest players.
In July, Mylan trumpeted a merger with Pfizer's generics business Upjohn, likely creating the biggest generics player in the industry if the deal is approved. As part of that agreement, CEO Heather Bresch agreed to retire from her post while President Rajiv Malik will stay on that role at the new company before eventually departing. Meanwhile, Chairman Robert Coury, instrumental in negotiating the merger, will stay on in the same role.
The merger followed years of investor pressure to rework Mylan's struggling business as revenues declined. Late last year, Mylan execs launched a "strategic review" to identify new business opportunities.
Then, in August, Teva Chief Financial Officer Michael McClellan announced he would be stepping down from his role after helping the drugmaker weather the storm after a series of catastrophic guidance cuts in 2017. McClellan was instrumental in instituting a $3 billion cost-cutting drive across Teva's business, which led to the elimination of 14,000 jobs––around 25% of Teva's workforce––and the closing of offices, manufacturing plants and R&D facilities globally.
Teva, like Endo, is facing massive opioid liabilities: In October, the drugmaker offered up a "global" deal valued at more than $23 billion to close the lawsuits it faces.
Within days of McClellan's departure, Amneal also cleared house at the top, announcing that Chairman Paul Bisaro––another steady hand brought in to steer the flagging ship––would step down alongside his hand-picked president and CEO Rob Stewart. Bisaro came on with Amneal with a reputation for big deals after heading the $66 billion buyout of Allergan in 2014 as head of Actavis and the subsequent $40 billion sale of Allergan's generics unit to Teva the following year.
Meanwhile, at Akorn, CEO Douglas Booth took over on the first day of the year, brought in to lead after the drugmaker's $4.3 billion deal with Fresenius collapsed spectacularly in December. Then-CEO Raj Rai was shown the door after the deal fell apart when the Delaware Supreme Court allowed Fresenius to back away over data integrity issues at Akorn.
Turnover at the highest level of the generics business has caused investors to worry there will be "a long road to recovery ahead" for the industry, Stanicky said. Endo might not even be close to done with its executive shake-up: Stanicky said three executives were offered cash incentives in August to entice them to stay on through the end of 2020. It wasn't clear who those executives were.
The most immediate concern for investors is whether Campanelli leaving could spell doom for any opioid litigation resolution in the near future, with Stanicky calling a definitive deal "not close." Campanelli himself stayed mum on the implications of his move.
"It's a balance of personal life decision and at the same time looking at the strength of the company where I believe it is and looking at what we've achieved and where we're headed and things that, which we control," he said, according to a transcript of the call. "There's no doubt that we all know what our challenges are with respect to liabilities."