Valeant to Evaluate Sales of Noncore Assets
Editor's note: Updates have been added and the third from the last paragraph has been amended for clarity.
The newly appointed CEO of Valeant Pharmaceuticals (VRX) told attendees at the UBS Global Healthcare Conference on Monday that the drugmaker will look at divesting noncore assets to pay down debt while emphasizing that the market is undervaluing its pipeline of drugs.
"There are a number of acquisitions that have built the value of the company," Chief Executive Joseph Papa told attendees in a fireside chat with UBS analyst Marc Goodman at the Grand Hyatt New York. "There will be some decisions where we decide what's core and what's not core."
Papa said potential divestitures serve as an opportunity to reduce complexity in the Laval, Québec, organization while also allowing the company to reduce its roughly $30 billion in debt load, pointing to the company's initiative to pay down more than $1.5 billion in debt in 2016.
It was only late Thursday that Valeant announced it had received a notice of default from bondholders over the delayed filing of its first-quarter performance with the Securities and Exchange Commission, following a similar notice received from bondholders last month.
When asked by Goodman whether the company would consider exiting any of its core business, Papa asserted that "we'll continue to do all the business reviews that need to be done."
The CEO added that near-term priorities include making sure he spends time with key stakeholders and what he described as the "front-line sales management." From an organizational standpoint he noted that Valeant's finance department has to be centralized, pointing to the recent hire of a new controller, but he added that additional controls need to be put in place. The rest of the company can run well as a decentralized organization, Papa said.
"Valeant has been a company that has grown very quickly over the last eight years," Papa said. "It has some great franchises but needs some investments such as finance."
Indeed, the embattled drug company has seen its valuation suffer and has gained significant public scrutiny in connection with allegations relating to its relationship with mail-order pharmacy Philidor Rx Services and Philidor customer R&O Pharmacy, as well as the company's legal but questionable accounting gamesmanship. Valeant in March pinned the blame on its former CFO and former controller, Howard Schiller, for its misstatements of earnings.
Valeant has replaced its Philidor distribution deal with a deal with Walgreens Boots Alliance (WBA) - Get Report . Papa noted the deal hasn't been "all smooth sailing" but asserted the opportunity remains significant.
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Papa, who joined the troubled drugmaker after resigning from his post at Perrigo (PRGO) - Get Report just three weeks ago, told attendees that he "wasn't looking for change" but that he was approached by Valeant's chairman about the company. Papa said he saw the value in the company's set of brands making up its dermatology, gastrointestinal and over-the-counter branded portfolio, describing these areas as a great foundation to build from.
The chief executive emphasized that there are two big misperceptions surrounding Valeant -- that the company doesn't have a pipeline of drugs and that it hasn't done R&D.
Valeant has a "great portfolio of new products I look forward to launching," the CEO said, pointing to its psoriasis treatment product that will come before the FDA advisory panel sometime this summer. The psoriasis product, IDP-118, is expected to be launched in 2017, according to the company's website.
Other products in the company's late-stage pipeline include glaucoma drug latanoprostene bunod and opioid-induced constipation drug Relistor Oral, according to Valeant's website.
From an emerging-market standpoint, Papa said the company expects to grow in the 5% to 10% range, adding that it already has some strong business in Asia.
Valeant shares Monday morning were down 32 cents, or 1.2%, to $27.15. Midday Tuesday, the slide continued, with shares at $25.87,off 34 cents or 1.30%.
