(Adds comment on Papa's tenure at Perrigo)
April 25 (Reuters) - Former Perrigo Co (NYSE:PRGO) Plc PRGO.N head
Joseph Papa was named Chief Executive Officer at Valeant
Pharmaceuticals International VRX.TO on Monday, a role in
which investors said he should focus on returning the company to
growth.
Papa will replace CEO Michael Pearson (LON:PSON), whose years of
frenzied dealmaking fueled double-digit profit increases at
Valeant until scrutiny of its controversial relationship with a
specialty pharmacy and history of sharp drug price increases hit
its shares and sales last fall.
Shares of Laval, Quebec-based Valeant rose on Monday after
it announced the high-profile hire before losing about 2.2
percent in New York trading to close at $35.16.
Shares are far from their August 2015 high of $263.70,
falling to the current level earlier this year after Valeant
said it would restate earnings and delay filing its 2015
financial report, opening the door to possible default on its
$30 billion in debt.
Papa, 60, takes the reigns after a decade at Perrigo and
previous positions at drug distributor Cardinal Health (NYSE:CAH) CAH.N ,
generic drugmaker Watson Pharmaceuticals which is now Allergan (NYSE:AGN_pa)
Inc AGN.N , and pharmaceutical giant Novartis AG NOVN.S .
Last year, he led Dublin, Ireland-based Perrigo to rebuff a
$26 billion takeover by Mylan NV MYL.O and spent six months
meeting with investors, urging them not to sell to Mylan. His
meetings and a public letter campaign convinced shareholders
that Perrigo should be a standalone company.
Papa's track record helped his case, but recent months have
been challenging and Perrigo said on Monday that its earnings
and sales will fall short this year, disappointing shareholders.
The shortfall is in part due to weak sales in Europe and its
Omega Pharma acquisition, both part of Papa's strategy, said
Wells Fargo (NYSE:WFC) analyst David Maris, who downgraded the stock to
market perform.
Papa does not have significant experience in branded
prescription drugs, Valeant's area of focus, Maris said. Perrigo
sells over-the-counter products, which are a small part of
Valeant's business.
"Perrigo has limited international business; Valeant has a
lot," said Maris, who rates the stock "underperform." "Perrigo
has acquired a lot of products and divested very few; Valeant's
future probably has a lot of divestitures."
Reuters reported earlier this month that Valeant had brought
in investment banks to review its options amid buyout firms and
other companies' interest in a number of its businesses.
Patrick Kaser, portfolio manager at Brandywine Global, which
owns more than 2.3 million Valeant shares, said Papa's
experience selling over-the-counter healthcare products would be
an asset for the company's skincare and Bausch and Lomb eyecare
lines.
Kaser said one early priority should be repairing Valeant's
relationship with health insurance companies, which are steering
patients away from the company's products. "Job One is slowing
and stemming the damage," he said.
The news of the appointment, first reported by Reuters,
pushed shares of Perrigo down more than 15 percent. The company
replaced Papa with President John Hendrickson, a 27-year Perrigo
veteran, and named director Laurie Brlas as chairman.
Perrigo reported preliminary first-quarter earnings of $1.71
to $1.77 per share and said it expected a full-year profit of
$8.20 to $8.60 per share, excluding special items. Both are
below analysts' expectations, according to Thomson Reuters
I/B/E/S.
Valeant was looking for a replacement for Pearson for more
than a month. He suddenly left in December on a medical leave
for pneumonia and returned to Valeant at the end of February.
Papa will also be chairman, a role Pearson had lost after his
return.
The changes have come after activist investor Bill Ackman,
who has lost billions of dollars on the company, joined its
board and creditors began to increase pressure. Several groups
of noteholders have issued notices of default, requiring Valeant
to file its 2015 financial report as soon as April 29.
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Valeant's deals and doubts http://tmsnrt.rs/1UdPNgW
BREAKINGVIEWS-Valeant's new CEO a good choice for a dim future
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