November 11, 2015
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – J. Michael Pearson, the embattled chief executive officer of Valeant Pharmaceuticals International Inc. , told investors Tuesday that the company’s decision to divest itself from specialty pharmacy Philidor Rx Services will have a negative impact on its dermatology business, about one-fifth of Valeant’s overall revenue.
But those losses will only be short term, Pearson said in a conference call. Pearson spoke with investors for almost 90 minutes on Tuesday, saying Valeant is working to develop better relationships with insurers and create a new program to ensure patients could get and afford the company’s products. Bloomberg reported. Pearson said average prices and sales volumes would be affected during the fourth quarter after severing ties with Philidor, Reuters reported this morning. One reason revenue will diminish is the company will fill some prescriptions for free, and provide deep discounts for others, Bloomberg reported.
“Our strategy is actually to keep the volume, even if we have much lower prices in the short-term,” Bloomberg reported Pearson as saying. “What we want to do is make sure doctors continue to not change their behavior.”
During the call, Pearson said dermatological sales were $465.5 million in the U.S. last quarter, out of total revenue of $2.79 billion. Of that, Philidor represented about $190 million in third-quarter sales, almost all of which were for dermatological products, Bloomberg reported.
In October, Valeant severed ties with Philidor after Citron Research published a scathing report over its accounting practices. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company. Some who are critical of the “prescriptions made easy” practice prevents patients and insurance companies from switching to cheaper alternative prescriptions and serves to pad the bottom lines of companies such as Valeant. Pearson said Philidor accounted for 6.8 percent of Valeant’s revenue during the third-quarter. Pharmacy executives have maintained they did nothing wrong.
In addition to developing a new program to deliver its drugs, Pearson said Valeant has a priority of paying down a $30 billion debt, Reuters said.
Pearson came to Valeant in 2008 and under his leadership expanded the company through aggressive mergers and acquisitions, taking over companies like Salix Pharmaceuticals, Ltd. and Bausch & Lomb. Under his leadership, revenue has grown seven-fold and stock prices had soared, until earlier this year. Since a high of $259.98 per share price on Aug. 4, Valeant’s has plummeted to a year-low of $79.01 per share. The stock is currently trading at $83.68 per share.
While Valeant has faced scrutiny over its drug pricing and its relationship with the specialty pharmacy Philidor RX Services, Pearson has also been under pressure by some investors, particularly Bill Ackman, the company’s third-largest shareholder, who has been critical of Pearson and the company’s crisis communications strategy, before ultimately expressing his support for the CEO.
“You are one of the most shareholder-oriented CEOs I know. You have assured me that you and the rest of the board are considering any and all alternatives that would benefit shareholders and other stakeholders. That is very comforting to us,” Ackman said in an email to Pearson.
However, the supportive tone of that email is different from other communications between Ackman and Valent leadership over the past few weeks. Citing the Wall Street Journal, a Business Insider report said Ackman, who has lost approximately $2 billion as Valeant shares have lost more than 75 percent of their value, sent an email to Pearson on Oct. 27 saying the CEO’s reputation was “at grave risk” and that Valeant has become “toxic.” He also indicated that Pearson may have to be replaced as CEO of Valeant, Business Insider said.
During Tuesday’s investor call, Pearson struck a conciliatory tone, saying the company will take time to “listen to what the broader world outside your company is saying,” Bloomberg reported Pearson as having said.
