Beleaguered drug giant Valeant Pharmaceuticals International ( VRX ) said Monday that it’s expanding the rebate program on two controversially priced drugs, in one of the first significant policy changes under its new chief executive. Valeant said that, effective immediately, all hospitals buying the drugs are eligible for a rebate of at least 10%, and possibly as high as 40%, depending on the volumes bought per quarter. This will be done largely through group purchasing organizations, but hospitals not using those can contact Valeant’s customer service directly, the company said. Nitropress, used to treat heart failure and high blood pressure, and Isuprel, used in the treatment of heart attacks, gained notoriety last year when Valeant hiked their prices by triple-digit percentages after acquiring them. This, along with some other drug-price scandals, led to Valeant’s management being hauled before a Senate committee, which Valeant CEO Joseph Papa thanked in Monday’s press release for “the attention they have brought to this issue.” Papa just joined the company on May 3, as previous CEO J. Michael Pearson was pushed out after watching the company’s stock tumble almost 90% under the weight of the pricing issue, as well as an accounting scandal. Pearson had already signaled that Valeant isn’t going to be pricing drugs as high as it used to and will no longer be looking for older assets like Nitropress and Isuprel, whose chief attraction is that they could be more expensive. Despite the move, Valeant stock was down 2% in late-morning trading on the stock market today , near 25. The stock so far hasn’t fared much better under Papa than it did under Pearson, hitting a six-year low of 23.54 on Thursday. It didn’t help matters that hedge fund Brahman Capital sold its stake in Valeant , according to Bloomberg, as well as in Endo International ( ENDP ), another troubled specialty drugmaker run by a former Valeant executive.
As had been widely rumored, drugmaker Perrigo ( PRGO ) lost its CEO to Valeant Pharmaceuticals ( VRX ) Monday and also reported preliminary Q1 earnings and guidance that missed expectations. Perrigo stock plummeted in early trading, while Valeant stock rose modestly. Valeant said Perrigo CEO Joseph Papa will take the helm as both chairman and chief executive in early May, replacing Robert Ingram in the former role and J. Michael Pearson in the latter. Anonymous sources had leaked Papa’s appointment to the press late last week, although it was still unclear at the time whether Perrigo would let him out of his contract. “(Papa) 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,” Ingram said in a statement. “In addition, fostering an ethical culture and creating opportunities for professional development have always been high priorities for Joe, and we look forward to Joe’s arrival at Valeant.” Valeant rose 1.4% to 36.45 in afternoon trading on the stock market today . Perrigo tumbled 15.2% to 102.93, hitting a three-year low. Just how much is Perrigo hurting, as Valeant takes its CEO? Get an idea on IBD Stock Checkup. Perrigo, meanwhile, named its president John Hendrickson as its new CEO, “aligned with our succession planning process,” according to Chairman Laurie Brlas. The company also said that Q1 sales were around $1.33 billion to $1.35 billion, missing analysts’ consensus of $1.4 billion, according to Thomson Reuters. Earnings were $1.71 to $1.77 a share, while Wall Street had expected $1.89. Perrigo also cut more than a dollar off its full-year EPS guidance, now $8.20 to $8.60. “The majority of this change in guidance provided on Feb. 18 is the result of a reduction in pricing expectations in our Rx segment due to industry and competitive pressures in the sector,” Perrigo said in a statement. “The remainder of the reduction is primarily due to weaker-than-expected performance within the BCH (branded consumer health care) segment for the next three quarters and lower expectations for consolidated new product launches.” Perrigo also said that it was assessing a possible impairment charge associated with the BCH business, which was formed when Perrigo acquired Omega Pharma last year. It said it will be prepared to report the extent of the charge when it issues its official Q1 report on May 12.
Shares of Valeant Pharmaceuticals International ( VRX ) rose sharply and fellow specialty drugmaker Perrigo ’s ( PRGO ) fell Friday on reports that the former is about to hire away the latter’s CEO. Late Thursday, the Wall Street Journal quoted anonymous sources saying that Valeant is hiring Joseph Papa if it can get Perrigo’s board to void a noncompete clause in his contract. On Friday morning, Perrigo issued a brief statement saying that it would not comment on “speculation,” which is the only official word from either company so far. Valeant has been hunting for a new CEO since March 21, when activist investor William Ackman moved to the board and tried to order the company’s growing chaos. The stock lost more than 80% of its value since a scandal related to a pharmacy partner broke last September, forcing Valeant to strike a new distribution deal with Walgreen Boots Alliance ( WBA ) that was accompanied by across-the-board price cuts. A disastrous Q4 report and guidance cut, along with an internal investigation that accused former CFO and current board member Howard Schiller of misconduct, eventually turned even bullish analysts against Valeant’s management. Papa, meanwhile, has run Perrigo for 10 years and has a largely successful track record. Under his watch, the company’s revenue has more than tripled, the stock has climbed eightfold, an inversion deal moved headquarters to low-tax Dublin, and Mylan ( MYL ) attempted a hostile takeover that Perrigo successfully fought off. IBD Take: Perrigo was once a hot stock, but not lately. Learn why in IBD Stock Checkup Perrigo’s once-steady profit growth has gotten uneven in the last couple of years, however, and the stock has declined more than 40% since its Mylan-induced high last April. It currently holds a mediocre IBD Composite Rating of 40. This change has led some analysts to worry about the implications of Papa’s departure for Perrigo. “Papa has become the face of Perrigo during his long tenure as CEO,” wrote Jefferies analyst David Steinberg in a research note. “However, with the exception of CFO Judy Brown, the company’s other executives — including John Hendrickson, who was appointed President in Oct. 2015 — are largely unfamiliar to the investment community. “Further, the timing couldn’t have been more inopportune. Mr. Papa is potentially departing prior to the announcement of Q1 results, and this follows a string of difficult quarterly financials — particularly in the company’s flagship consumer business.” Guggenheim analyst Louise Chen agreed, noting that Perrigo is widely expected to miss Q1 estimates and lower its guidance. “There has been debate about senior management change at Perrigo, but we don’t think the Street was thinking that it would actually happen or be this soon,” Chen wrote. Perrigo stock was down 5.8% in late-afternoon trading on the stock market today , near 121, after hitting its lowest level intraday since August 2013. Valeant stock was up 7.7%, near 36.