- Valeant Pharmaceuticals on Monday named former Perrigo Co. chief Joseph Papa as its new chairman and CEO, replacing Michael Pearson as head of the embattled drugmaker.
- Perrigo announced Papa's resignation earlier on Monday morning after reportedly waiving a non-compete clause in his contract which cleared the way for his move to Valeant.
- Papa has lead Perrigo for nearly 10 years, successfully negotiating a merger in 2013 which moved Perrigo's legal residence to Ireland. Last year, he helped Perrigo stave off a hostile takeover bid from Mylan NV. Perrigo President John Hendrickson will succeed him as CEO.
- The transition will be effective as soon as Papa arrives at Valeant. Papa will also join Valeant's Board of Directors.
Papa's appointment concludes a search which began in March when the company announced long-time CEO Michael Pearson would be stepping down.
"The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time," said Robert Ingram, chairman of the Valeant board. " He has a strong shareholder orientation, a background in science, and an unmatched track record of accomplishments, highlighted by his ability to lead companies through times of transition and drive excellence across commercial, manufacturing and R&D platforms."
Papa will join Valeant as it attempts to pivot from a disastrous several months and successfully file its much-delayed annual report with the U.S. Securities and Exchange Commission. The delay in filing has lead a number of bondholders to submit notices of default to Valeant, giving the company 60 days to file the report before immediate repayment could be demanded.
Valeant has pledged to file on or before April 29 and successfully negotiated an extension of its deadline with other creditors. But winning that extension proved costly as Valeant was forced to temporarily increase the interest rate it pays on its loans by 1%, as well as pay a percentage based fee to each lender who agreed to the extension.
Filing the report, known as a Form 10-K, will be among the top priorities for Papa as he assumes leadership of the company. But there are a number of problems which run deeper. Valeant has been under intense investor pressure after revealing new government investigations and paring back 2016 sales estimates by $1.5 billion dollars.
A $600 million typo in a March business update only exacerbated those problems, precipitating a more than 50% fall in the company's stock. It has since recovered somewhat but the drugmaker continues to face scrutiny from Congress over its pricing practices.
Pearson is scheduled to testify on the company's pricing later this week before the Senate Special Committee on Aging.
As for Perrigo, Papa will be replaced by a company veteran. Hendrickson has been President of Perrigo since last October and has held a number of senior roles since joining the company in 1989, including head of global operations and supply chain. He will replace Papa as CEO, but independent director Laurie Brlas will take over Papa's position as Chairman of the Board.