By Jonathan D. Rockoff, David Benoit and Liz Hoffman
Valeant Pharmaceuticals International Inc. is finalizing a
contract to name Perrigo Co. Chief Executive Joseph Papa as its
next CEO, hoping a fresh face and an experienced
pharmaceutical-industry boss will calm nervous investors.
Valeant has reached a contract deal with Mr. Papa and had aimed
to announce as soon as next week that he would succeed longtime
chief Michael Pearson, according to people familiar with the
matter.
But the appointment has hit a sticking point as the Perrigo
board hasn't said whether it would allow Mr. Papa to void a
noncompete clause in his contract, the people said. The Perrigo
board had a call for several hours on Thursday and didn't reach a
decision, the people said.
Valeant considers the overlap between Perrigo and Valeant to be
limited and the companies are rarely considered direct competitors,
the people said.
Mr. Pearson, 56 years old and recently recovered from severe
pneumonia, lost the support of the company's board, which last
month said it was seeking his successor and "identified concerns"
about the "tone" of a company that has grown rapidly through
acquisitions and ambitious sales targets.
If it goes through, the appointment of Mr. Papa, 61, would mark
a new chapter for the drug company, which has lost some $80 billion
in market value since last summer on a storm of political scrutiny
and the disclosure of errors in its financial reporting.
Mr. Papa has broad industry experience with pharmaceutical
companies such as Perrigo and wholesalers such as Cardinal Health
Inc., skills the Valeant board is seeking to help mend fractured
relations with payers. Insurers and pharmacy-benefit managers have
pulled back on Valeant drugs after steep price increases and
revelations about Valeant's ties to a mail-order pharmacy that
pushed its expensive drugs.
The search for a new CEO was led by a small group of independent
Valeant directors including investor William Ackman and Chairman
Robert Ingram, the people said. The board -- which includes Mr.
Ackman and three other new directors who have joined since early
March -- is also considering a number of steps aimed at restoring
confidence that the company can manage its heavy debts.
These options include the potential sale of a variety of drug
products and assets, according to people familiar with the
matter.
Mr. Papa's planned move comes shortly before Perrigo's annual
meeting on Tuesday, putting the company under pressure to name an
interim or permanent successor quickly, although Valeant has agreed
to let him stay through that meeting to help the transition, one
person said.
Mr. Papa has spent almost a decade at the helm of Perrigo, which
makes generic drugs as well as store-brand painkillers, cold
medicines and other over-the-counter products for retailers like
Walgreens Boots Alliance Inc.
In 2013, he led the company, then based in Michigan, through a
merger with an Irish rival that moved its legal home to Ireland in
a deal known as an "inversion," which can cut a company's taxes.
Valeant cut its own taxes through a similar deal in 2010.
Last year, Mr. Papa beat back a hostile takeover bid from Mylan
NV, spearheading a campaign that ultimately persuaded shareholders
to reject Mylan's bid -- a rare feat.
Since then, though, Perrigo has reported disappointing quarterly
results and cut its 2016 outlook. Its stock is down 35% over the
past year, giving it a market value of $18.4 billion. In the time
since Mr. Papa became CEO, the stock gained nearly eightfold.
Despite Perrigo's recent stumbles, Mr. Papa is well-known among
investors, more so since the highly public Mylan campaign, in which
he met extensively with shareholders to lobby for their
support.
From his time at Perrigo, Mr. Papa knows generic drugs, an
important component of Valeant's portfolio. And he is familiar with
Walgreens, a major Perrigo client that Valeant is counting on to
help fill prescriptions and gain reimbursement for the drug
company's skin medicines.
His pharmaceutical-industry experience and health-care industry
relationships generally could be valuable as Valeant works to
stabilize its business and restore relationships with wholesalers
like Cardinal and the various companies that pay for drugs.
Some health insurers and drug-benefit managers have dropped
coverage for certain Valeant drugs after revelations that a
mail-order pharmacy with close ties to the company used aggressive
tactics to secure reimbursement of high-priced Valeant
products.
The revelations triggered a board investigation that led to a
financial restatement and a delayed filing of its annual report,
putting it in danger of violating some of its debt terms. Valeant
is also under investigation by the Securities and Exchange
Commission, and the Justice Department is probing the company's
drug-pricing practices.
Jacquie McNish contributed to this article.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com, David
Benoit at david.benoit@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
(END) Dow Jones Newswires
April 21, 2016 23:21 ET (03:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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