With new CEO’s dealmaking and price-hiking past, can Valeant change its spots?


Valeant, badly in need of a turnaround, is staring down a future without its signature price-hikes and acquisitions. Can new CEO Joseph Papa--who employed both strategies at his former company--get the job done?

Under Papa, list prices at his former company, Perrigo, rose 52% over the past four years, compared with an average 18% across the industry, according to an SSR analysis cited by The Wall Street Journal.

And like Valeant--whose dramatic price increases on specific medicines have been the subject of congressional hearings and a government investigation--some of Perrigo’s meds saw mammoth individual price jumps. Take steroid desonide, for one, which cost 85 cents per gram before two 2013 price hikes took that figure to $5.35. Three upward price adjustments took the list price for lice treatment permethrin up from 49 cents per gram to $3.09, too, the Journal points out. Each of those products saw an increase of about 530%.

Of course, the list price increases don’t reflect discounts, and as Perrigo told the WSJ, competition from generics rivals helped spur the decisions to push prices higher. “Like any business we take our competitors’ pricing into account,” a Perrigo spokeswoman told the newspaper.

But Perrigo under Papa’s guidance shared other similarities with Valeant, too--including a buying streak. Following in Valeant’s footsteps, the drugmaker completed an inversion of its own to snag an address in tax-advantaged Ireland. And its most recent pickup--Omega Pharma--has struggled. That's something Valeant--owner of Sprout, which makes the floundering female libido med Addyi--knows a thing or two about.

Going forward, though, Papa says he’s ready to embrace new tactics to get Valeant back on track--such as selling off non-core assets to reduce the complexity of the drugmaker’s business and pare down its mountain of debt. And according to Wells Fargo analyst David Maris, he’d better be.

“The challenge alone is so big I don’t think whatever CEO came in, they’d have an easy time. But if one is going to rely on the tricks of the past, like acquisitions and international expansion and price, that’s just not going to work,” Maris told the Journal.

- read the WSJ story (sub. req.)

Special Report: The most influential people in biopharma today - 2016 - J. Michael Pearson - Valeant

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