Valeant Holds a Shareholder Meeting, and Nothing Goes Wrong

Valeant CEO Joe Papa Outlines Turnaround Plan
  • CEO Papa would consider selling core assets at the right price
  • Drugmaker is happy with with Walgreens arrangement, may expand

Things might finally be calming down with Valeant Pharmaceuticals International Inc.

On Tuesday, the company participated in a typically uneventful ritual performed annually by corporations -- in a 100-person conference room in a Montreal suburb, stocked with coffee and bottles of Perrier, it held its annual meeting. And for the first time in a while, Valeant’s public interaction with shareholders wasn’t followed by a steep drop in its stock.

During the sparsely attended, 40-minute session, the stock tracked the broader market, rising as much as 1.1 percent, then declining by about 1.2 percent.

That’s a stark difference from its first-quarter call on June 7, when the shares closed down 15 percent, or the fourth-quarter results release in March, when they fell 51 percent. Chief Executive Officer Joseph Papa, who started last month, said the emphasis at Valeant now is on steadying the company, not executing high-flying M&A deals or pushing the limits of drug pricing, as the company was once known for.

“The focus of this company is to focus on trying to improve patients’ lives,” Papa said to reporters after the meeting. “That’s a difference from where we were before.”

Win Back Trust

He said he took the job because he thinks he can win back the trust of investors and patients.

“I believe I fundamentally can do that,” he said. “I’m not trying to suggest anything can happen overnight.”

At the brief session, the company was asked few difficult questions, all of which Papa and the board appeared to handle easily.

“Given that the past 12 months have been rather traumatic, I was rather surprised there wasn’t more discussion,” one attendee, who didn’t identify himself, said to Papa and the board when the meeting was opened to questions from shareholders. Valeant’s shares have lost more than 90 percent of their value since August, following questions about the company’s price increases on drugs, its relationship with a mail-order pharmacy, cuts to its forecast, and the announcement in March that CEO Michael Pearson would step down.

“The important thing I needed to do here is to really focus on the future,” said Papa.

Divestitures

The company’s next step will likely be divesting some of its businesses to help pay down more than $30 billion in debt accumulated during the drugmaker’s multiyear acquisition spree, led by Pearson in pursuit of growth. The company is working with advisers as it weighs the sale of its Obagi Medical Products, Solta Medical and Egyptian drugmaker units, people familiar with the matter have said in recent weeks.

At the right price, it might also consider selling some of its “core” businesses, which Papa described as the Bausch & Lomb, dermatology, gastrointestinal drugs and consumer units.

“We’re a public company,” Papa said to reporters after the meeting. “If there’s an offer that is a significant offer, I think we’d always have to assess any offer that comes into us.”

Papa said earlier this month that Valeant has been losing money on the sale of some drugs through a distribution deal with Walgreens Boots Alliance Inc., and that he was trying to improve the 20-year arrangement. The Financial Times on June 8 reported that Valeant might try and end the deal. On Tuesday, Papa called it a “very strong agreement.”

“Does it have, as with any brand-new programs, some items that need to be improved on? Yeah,” Papa said. “But nothing in this business relationship in my mind suggests anything other than an opportunity for the future. We’ll look to see what’s in other categories of products or other things we can do with it.”

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