The shares of Valeant Pharmaceuticals are a long way off from where they stood nearly two years ago. Back in the third quarter of 2015, VRX was comfortably above $250 a piece. Today the company’s stock floats just beyond $9. Valeant looks set to drop much lower, too, as controversy about its new CEO’s remuneration comes to the fore this week.
In summary, steep costs appear to be forked out in favor of Joseph Papa, CEO of Valeant Pharmaceuticals. Before taking the helm at Valeant last year, Joseph Papa was the CEO and Chairman of Perrigo for a decade. The man lead the over-the-counter drug firm through numerous successes. Papa took on the roll of Valeant’s chief exec back in May 2016. The company has clarified that the new CEO’s package is only fair compensation for recruiting Papa from another sitting CEO position.
Wall Street recently made news of the massive package that Papa entitled to. Safe to say, investors are not too pleased to learn about the near $63 million secured by the new CEO. Valeant filed a proxy form nearly two weeks ago. It reveals that Papa received a total $62.7 million. That figure is made up of a bonus ranging over $9 million, more than $51 million in stocks and other options, and a basic salary of $980,769.
Papa’s package could prove justifiable. However, the multi-million dollar figure remains a sore number to highlight in the midst of the company’s most unfavorable position in years. Beyond this, VRX is now struggling to secure adequate bids for the assets it seeks to sell. The company’s share value looks to be set on plummeting further if a decent turnaround doesn’t show itself soon.
Of course, these rewards offered to Papa may not have been so startling if Valeant had secured a decent year-to-date. However, it is hard to overlook the massive debt and diminished influenced that the company is yet to remedy. VRX has been offsetting non-core assets as promised and for a time seemed to be regaining strength. However, the last 12 months saw the company lose more than 61 percent of its share value.
The company sought to set the record straight this week. In more recent filing, the company made clear that the Mr. Papa’s remuneration package forms part of the expected “terms for recruiting a sitting CEO.”
Valeant is expected to make more moves to reduce its large debt pile early on this year. Legal issues and a weakened grip over drug markets have cast skepticism over the company and its public image. Couple that with an unfavorable financial situation, and you get a stock which has forces investors to withdraw and shy away from it. The shares of Valeant have been on a steep downhill path in for more than a year. July 2015 saw VRX stock soaring beyond $250. Those same shares are seen battling to keep up above $10 in April 2017. It’s a price the drug maker hasn’t seen in over six years.
Despite this, there appears to be a degree of formidable investors who still hold large stakes in VRX. Currently the firm holds about $30 billion in liabilities. By selling off a few non-core assets, Valeant plans to cut that figure down by over 16 per cent during the next year and a half. While it may not be much of a climb, it is a steady step toward increased favor and boosted confidence for investors.
Valent Pharmaceuticals was reported to be selling off its cancer drug business. According to the company, the disposal of Dendreon, along with the sale of three skin-health products, promises to pull in a total of $2 billion for the firm. Analysts appear to recognize the venture as a great deal which gets VRX a triple-barrel return in relatively quick period. In fact, a few assets will be disposed at multiple times their acquired cost. VRX jumped more than 6 per cent shortly after the announcement.
Looking at Dendreon, Valeant (NYSE:VRX) paid just over $494 million for the company back in February 2015. The Cancer drug giant was in bankruptcy at the time, but its expertise in cancer immunotherapy treatments were still items of worth. In January 2017, Valeant Pharmaceuticals announced that it will be selling off Dendreon for around $820 million dollars. The cancer unit was acquired by a Chinese drug conglomerate called Sanpower Group.
Valeant’s poor public image
Appearance counts a lot for any company and Valeant Pharmaceuticals doesn’t look too good in the eyes of public at the moment. The firm’s scandals have done very little to win over investment while a number of investigations would suggest that the company holds a few dishonest tendencies.
A large, drug retailer, Philidor Rx Services, made a lot noise over Valeant’s disclosure of accounting figures back in 2015. Philidor highlighted the drug maker’s inaccurate revenues account and forced the company to go over its figures once again. This resulted in a late annual 2015 filing, with the same effect on 2016’s Q1 financials.
As a distributor, Philidor is expected to act a neutral party. However, the noticeable ties between Valeant Pharmaceuticals and Philidor have cast doubts over the distributor’s capacity to remain impartial. Currently, Philidor is suspected of favoring Valeant drugs over other, cheaper therapies. The distributor was reported to be have complied with authorities to resolve the matter.
Weakened market authority
Another one of Valeant’s woes is its diminishing influence over the drug market. The entity’s pricing powerwas hurt a great deal when it came clean about misappropriating the prices of two acquired drugs.
Former chief exec J. Michael Pearson reported that a mistake was made in calculating the selling prices of Isuprel and Nitropress. The two cardiovascular remedies were bought in February last year and underwent price increases of 212 and 525 percent respectively. No chemical amendments or changes in production could be found to back the increases.
Industry regulators now keep a watchful eye over Valeant and its prices. Lax drug pricing is a valuable commodity in the pharmaceutical space. It lets drug makers easily cover development losses and the steepened costs of other drugs. This can be seen with many branded treatments and Valeant is lessened without its former pricing luxuries.
Will VRX rise again?
Investors still anticipate a turnaround from the company despite its looming setbacks. The consensus is that it would take a great effort in order to achieve this, but it is not unlikely either. Increased investment will only be achieved through more a trustworthy business model, sustainable debt-shedding and better asset management.