Valeant ($VRX) has been searching hard to find a new CEO to lead it out of its current turmoil. And now, it’s got one--almost.
The Canadian drugmaker is finalizing a contract to bring on Joseph Papa, the current head honcho at Irish drugmaker Perrigo ($PRGO). The two parties have already reached a deal, The Wall Street Journal reports, and the pharma is hoping to announce Papa as J. Michael Pearson’s successor as early as next week.
There’s just one catch: Perrigo’s board hasn’t made clear whether it’ll allow Papa to stamp out a non-compete clause in his current contract, sources told the newspaper, and a several-hours-long call on the matter Thursday didn’t produce a conclusion.
If it does, though--and Valeant is hopeful it will, considering it sees the overlap between the two companies as limited--Valeant will finally be ready to close the book on the Pearson era. The company announced last month that it would be parting ways with its longtime skipper as soon as it could find a successor, linking the “tone at the top of the organization and the performance-based environment” to the “improper revenue recognition” that has itself caused a host of recent problems for the drugmaker.
Papa, in his place, would be tasked not only with cultivating a new company culture, but also with bolstering Valeant’s underperforming businesses, reformulating its controversial pricing strategies, rehabbing its tainted image, regaining investor trust, boosting formulary access for its meds, managing its high debt levels, and juggling a slew of investigations and lawsuits into the company--to name a few key responsibilities. The Quebec-based company and its share price have suffered mightily over the last few months amid channel-stuffing allegations, formulary freeze-outs and intense political scrutiny.
But Valeant’s directors--including Chairman Robert Ingram and activist investor Bill Ackman, who helped lead the CEO search--may be looking at Papa’s industry experience as a sign he has what it takes to turn things around. Experience with both drugmakers and wholesalers such as Cardinal Health ($CAH) may help him put Valeant’s tattered payer relationships on the mend, the WSJ notes--and that’ll be important to finalizing managed care contracts, a job Evercore ISI analyst Umer Raffat called “the first job at hand” in a Friday note to clients.
Of course, Valeant’s board isn’t expecting a CEO swap to solve everything on its own. It’s also weighing an array of moves meant to restore investor confidence that the company won’t sink under the weight of its hefty debt load--including selling off a variety of drugs and assets, sources told the Journal.
Meanwhile, Papa’s potential move could put his current company in a bind. Perrigo, currently in the middle of a broad cost-cutting initiative it began as move to fend off hostile suitor Mylan ($MYL) last year, plans to host its annual meeting early next week, although Valeant has reportedly agreed to let him stay through the meeting to help ease the transition.
- read the WSJ story (sub. req.)
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