Valeant Said to Be in Talks to Hire Perrigo's Papa as CEO

  • Drugmaker has been searching for replacement for CEO Pearson
  • Papa joined Perrigo in 2006, fended off hostile bid from Mylan

Valeant Pharmaceuticals International Inc. is in talks to hire Perrigo Co. Chief Executive Officer Joseph Papa to lead the drugmaker and replace departing CEO Mike Pearson, according to a person familiar with the matter.

The person spoke on condition of anonymity because the matter isn’t yet public. Perrigo said in a statement Friday that it was aware of what it called “speculation” and declined to comment further. Valeant declined to comment.

Valeant said in March that Pearson would leave the drugmaker once a replacement was found, part of a broader overhaul that included adding activist investor Bill Ackman to its board. Ackman said earlier this month that the company was “weeks and not months” away from finding a replacement CEO, a job he said was “extremely attractive” to many candidates.  

“Papa is an industry veteran with extensive pharma executive experience,” BMO Nesbitt Burns Inc. analyst Alex Arfaei said in an e-mail to clients. He said Papa’s hiring, if it happens, should be viewed favorably given the executive’s experience doing deals, and that Papa’s focus on buying consumer health products and over-the-counter drugs could match up well with Valeant’s consumer and vision care lines.

CEO Search

Valeant’s talks with Papa were first reported by the Wall Street Journal. The drugmaker had been aiming to announce the move as early as next week, but the appointment has hit a roadblock as the Perrigo board hasn’t said whether it would allow Papa to void a non-compete clause in his contract, the Journal reported, citing people familiar with the matter.

Valeant shares gained 7.9 percent to $35.98 at the close in New York. Perrigo fell 5.7 percent to $121.35.

Laval, Quebec-based Valeant has suffered multiple controversies and setbacks in recent months after drawing scrutiny over its business practices, accounting and drug pricing. It delayed filing its 2015 financial statements while an ad-hoc committee of the board reviewed its relationship with mail-order pharmacy Philidor Rx Services LLC. In February, Valeant said it would restate financial results from 2014 and 2015 related to Philidor.

Papa successfully fended off Mylan NV’s $26 billion hostile takeover attempt for Dublin-based Perrigo last year. He joined Perrigo in 2006, according to the drugmaker’s website. Before that, he held management positions at companies including Novartis AG and Watson Pharmaceuticals Inc. Perrigo sells over-the-counter and prescription medicines, as well as other products such as infant formula. The company’s shares have lost 40 percent over the past year.

Challenges Ahead

If Papa’s appointment at Valeant goes through, he would be tasked with navigating the drugmaker through several challenges. Valeant’s failure to file financial statements by their original deadline has already angered its lenders, with the company having to seek an amendment and waiver to its bank credit agreement. Earlier this year, Valeant said it was under investigation by the U.S. Securities and Exchange Commission. Valeant shares have lost more than 80 percent since their August peak.

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