April 26, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Joe Papa, Valeant ’s newly-tapped chief executive officer, faces immediate accounting and images challenges with Valeant when he assumes his new duties in May.
A new CEO at Valeant will likely be good news for investors, although there will still be plenty of challenges for a new top executive, including the company’s debt issue, which has been jeopardized due to a delay in filing its annual report. The company said it plans to file those reports by the end of this month, but the delay has upset some investors. The delay was caused after Valeant announced in February it believes approximately $58 million of net revenues reported in the second half of 2014 “should not have been recognized upon delivery of product to Philidor.”
MarketWatch noted Monday that if Valeant fails to file the 10-K form by April 29, there is another filing deadline of June 11 from bondholders who issued a notice of default. There is also another 10-K deadline on June 21 from bondholders who submitted a separate default notice on Friday, MarketWatch said.
With the leadership transition, MarketWatch speculated there may be a delay in filing those forms, which could spell bad news for Valeant.
Earlier this month, Valeant brought in investment banks to review its financial options, which could include divesting itself of some of its bigger assets. What those assets are have not been disclosed, but Ackman and other executives said it was unlikely Valeant would sell off any of its core assets.
Papa replaces Michael Pearson, who oversaw a period of rapid growth at Valeant, primarily based on an aggressive M&A mindset. However, the company hit some major stumbling blocks with the Philidor scandal and a Congressional inquiry into the company’s pricing policies. Since August, the stock has dropped nearly 90 percent. Pearson’s departure from Valeant was announced only weeks after he returned from medical leave that sidetracked him for about two months. In March, Valeant’s board of directors initiated a search for a new CEO to replace the recently returned Pearson at the helm of the company. Robert Ingram, chairman of Valeant’s board of directors, said he believes the company “will be able to rebuild its reputation and thrive under new leadership.”
Since Papa was announced as the likely candidate for the new CEO position at Valeant, company shares have been on the rise, hitting $37.31 on Monday. However, stocks slid later in the day, closing at $35.36 per share.
Papa resigned from his position at Perrigo on April 24 and was promptly named the new CEO at Valeant on April 25. Valeant said it anticipates Papa will assume his new duties in May.
While at Perrigo, Papa led the effort to stave off a takeover by Mylan , something he called a “bad deal” for company shareholders. He also oversaw the acquisition of U.S. rights to a gastroenterology medicine Entocort from AstraZeneca for $380 million and the acquisition of Patheon’s Mexico operations for $34 million. He also oversaw the deal to acquire Omega Pharma, which Papa said provided the company with “a pit and-European branded consumer healthcare business that is delivering greater benefits than we originally expected.”
Perrigo’s abrupt departure from Perrigo has not gone without criticism. When the company announced Papa’s departure this week, Perrigo also announced it was cutting its economic forecast for the year, Bloomberg said. Ram Selvaraju, an analyst with Rodman & Renshaw, told Bloomberg that Papa was leaving the company he helmed for nearly a decade in “terrible shape.”
“It looks like he’s abandoning ship and going to another company that’s even more troubled,” Selvaraju told Bloomberg.
