It’s official: Joseph Papa is in as Valeant’s new CEO. And that means it’s time for skipper J. Michael Pearson to pack his bags.
The Canadian drugmaker announced the appointment on Monday after receiving confirmation that Perrigo wouldn’t contest the departure of Papa, who has held its top spot since 2006, despite a noncompete clause in his contract. And he’s expected to assume his new role at Valeant--as well as a stint on the board of directors--by early May, the company said.
Valeant will be looking to Papa to spearhead a massive turnaround after months of turmoil that have decimated its share price. It’s currently facing multiple investigations--into both its pricing strategy and a short-seller’s channel-stuffing allegations--and it’s been dogged recently by accounting blunders, languishing sales, formulary freeze-outs, debt issues and plenty of investor skepticism and mistrust.
On top of that, Papa will be responsible for cultivating a new company culture to replace the “tone at the top of the organization and the performance-based environment” that Valeant has blamed for the inconsistencies in its finances.
But as Morgan Stanley analyst David Risinger pointed out in a note to clients on Friday, there are plenty of reasons Papa may have wanted to take the plunge. Righting the ship at Valeant may hold the promise of a hefty compensation bump, and he may find working from his home state of New Jersey--where Valeant runs its business--preferable to commuting to Perrigo’s headquarters in Michigan.
Either way, the Quebec-based pharma is confident he’s up for the challenge. “Fostering an ethical culture and creating opportunities for professional development have always been high priorities for Joe,” lead Valeant director Robert Ingram said in a statement. Papa, in his own statement, cited “an opportunity to move forward with a renewed focus on operating with integrity across all areas of the business.”
It’s the end of an era for Pearson, whose aggressive price-hike strategies landed the company in the doghouse after politicians jumped on the issue last year. His M&A-heavy strategy helped turn the company into a Wall Street favorite until an ominous tweet from Hillary Clinton sent investors running for the door.
Meanwhile, over at Perrigo, company president John Hendrickson is preparing to step into Papa’s shoes as the Irish drugmaker’s new head honcho. Perrigo shares sank more than 10% early Monday on the news of Papa’s departure.
- read Valeant's release (PDF)
Valeant close to announcing Perrigo's Papa as new CEO: WSJ
Senate committee grills Valeant CEO Pearson for 9 hours: Bloomberg
Valeant heeds calls for new CEO
Ex-Sanofi, Schering CEOs were on a short list to replace Valeant chief Pearson: WSJ
Pictured is Joseph Papa, courtesy of Smith & Nephew.