Valeant Names Zoetis Executive as Financial Chief--Update
August 22 2016 - 3:30PM
Dow Jones News
By Vipal Monga
Valeant Pharmaceuticals International Inc. largely completed a
makeover of its top ranks on Monday by hiring drug-industry veteran
Paul Herendeen as its new chief financial officer. Now comes the
hard part: execution.
"It's going to be a cleanup role," said Louise Chen, an analyst
for Guggenheim Securities, referring to Mr. Herendeen's task at the
embattled Canadian drugmaker. "The first thing they have to do is
string together a couple of good quarters," she said.
In his new post, the 60-year-old executive, which Valeant lured
away from animal-health giant Zoetis Inc., succeeds Robert
Rosiello, who will stay on as head of corporate development and
strategy. The Wall Street Journal first reported the change in
Valeant's executive lineup on Sunday night.
Mr. Herendeen's appointment continued a management shakeup at
Valeant, which hired a new chairman and chief executive this
spring, named a new general counsel earlier this month, and has
expanded its executive committee and given some of its senior
executives bigger roles.
On Monday, Valeant's stock, which traded above $260 a share last
year, was at $31.28, up 8.8%, in midafternoon New York trading. The
company's market value fell sharply over the past year as its
strategy of acquiring drugs and sharply raising their prices, as
well as its accounting practices, came under heavy scrutiny from
regulators and investors.
Earlier this year, Valeant had a close brush with defaulting on
some terms of its debt, because it was late to file its annual
report.
The company has since been sued by shareholders and faces an
investigation by federal prosecutors into whether it defrauded
insurers by obscuring its ties to a mail-order pharmacy that
boosted sales of its drugs. Valeant has said it has been
cooperating with the investigation.
In an interview with The Wall Street Journal, Mr. Herendeen said
he is walking into Valeant with eyes wide open. "In no way do I
want to minimize the challenges facing the company and the
potential for other things to go bump in the night," he said. "As a
new team we need to look back and deal with this."
He emphasized that he took the job because he saw potential in
the turnaround effort led by Joseph Papa, who became Valeant's
chief executive in April.
Mr. Herendeen cited Valeant's heavy debt burden as an immediate
source of concern, because it limits the company's options. The
drugmaker has more than $30 billion of long-term debt on its
balance sheet.
Mr. Papa has said the company will sell assets to reduce its
debt load. He has had success in recent weeks amending some terms
of that debt to give Valeant more leeway in managing its cash.
But the company is still struggling with the fallout from its
accounting troubles. T. Rowe Price Group Inc. filed a lawsuit
against it last week, alleging that Valeant engaged in "a
fraudulent scheme" that cost shareholders billions of dollars.
"Valeant intends to defend itself and cannot comment further on
ongoing litigation," a company spokeswoman said of the lawsuit.
Earlier this month, the company reaffirmed its earnings forecast
for the year following a string of reductions, and analysts
upgraded their rating of the stock.
Mutual-fund giant Fidelity has also sharply boosted its stake
this year.
Mr. Papa said in an emailed statement that he hired Mr.
Herendeen because of his "strong operational focus and disciplined
approach to financial management." Mr. Herendeen, a hockey
enthusiast, added that he didn't leave Zoetis because of any issues
with the animal-health company, which he came out of retirement to
join two years ago. Rather, he said, success in turning around
Valeant could be a capstone to his career.
Before his stint as Zoetis's CFO, Mr. Herendeen was finance
chief at drugmaker Warner Chilcott PLC, which he helped sell to
Actavis Inc. in 2013. Warner Chilcott was purchased by a consortium
of private-equity firms in 2005, and Mr. Herendeen helped manage
its debt-heavy balance sheet.
Mr. Herendeen said his selection for the Valeant post follows a
summertime interview process that included lengthy conversations
with Valeant's Mr. Papa and Mr. Rosiello.
Mr. Herendeen shepherded Zoetis through costs cuts, acquisitions
and a brush with activist investor William Ackman, who bought into
the company in 2014. Mr. Ackman is also an investor in Valeant and
a board member, but he didn't speak directly with Mr. Herendeen
about his appointment.
Shares of Zoetis have risen almost 50% since he joined it. Late
on Sunday, the company said it would name Glenn David as its new
finance chief. Mr. David had previously served as interim CFO at
Zoetis before Mr. Herendeen's arrival.
Write to Vipal Monga at vipal.monga@wsj.com
(END) Dow Jones Newswires
August 22, 2016 15:15 ET (19:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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