Vaelant Pharmaceuticals is closing in on a deal to hire Joseph Papa, the current CEO of Perrigo, as its new CEO, according to The Wall Street Journal.
If he signs on, Papa will replace controversial CEO Michael Pearson.
Pearson presided over the company during a glorious growth period up until October, when accusations of malfeasance from a short seller combined with government scrutiny over Valeant’s pricing practices brought the company to its knees.
After Valeant failed to deliver its annual report in March, the company announced that Pearson would step down.
Papa, needless to say, will have a lot to take on. The WSJ reports that Bill Ackman of Pershing Square Management, a major shareholder of Valeant, led the search for the new CEO.
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.
Valeant’s stock is up almost 9% on this news, but analyst notes about the challenges Papa would face are already circulating around the Street. One said that it was, frankly, a “big surprise.”
Here’s a take from Morgan Stanley [emphasis ours]:
How might Valeant investors push back? Papa has limited experience in leading branded pharmaceutical franchises; note Valeant’s Rx business is the one which is struggling the most. His career has largely focused on generic drugs and Consumer products. Separately,although Papa had a very strong track record for much of his tenure at Perrigo (including being on thecover of Barron’s March 26, 2012 article “World’s Best 30 CEOs.”), execution at Perrigo’s highest-multiple businesses has been mixed in recent years. Perrigo’s core US Consumer (private label) franchise disappointed due to competitive pressures and new product launch delays. And acquisitions of private label baby formula, pet care, and branded consumer (Omega) faced more challenges than expected shortly after being acquired.