By Anne Steele and Jacquie McNish 

Valeant Pharmaceuticals International Inc. Chief Executive Joseph Papa received compensation last year valued at $62.7 million, after the drug-industry veteran was tapped to take over the struggling drug company suffering from accounting problems, high debt levels and an image issue.

Under Mr. Papa, the Canadian company has been working to sell off assets to sharpen the company's focus on its key franchises in skin drugs, stomach treatments, eye care and consumer health while paring down roughly $30 billion in debt.

Mr. Papa, despite receiving one of the highest compensations last year for a CEO, has been unable yet to turn around Valeant's fortunes. The stock has fallen 67% since he replaced Michael Pearson on May 3, including a 55% drop during his 2016 tenure, and Valeant reported a $2.41 billion loss in 2016 on a 7.4% decline in revenue. More recently, Valeant lost one of its most prominent supporters when hedge-fund titan William Ackman sold his stake.

Still, Valeant's board backed its CEO. "The board is very supportive of Mr. Papa's efforts to date and is confident in his abilities and those of his team to lead us through our transformation," the company said Thursday in a government filing that detailed Mr. Papa's pay package, among other things.

About two-thirds of Mr. Papa's pay -- $42 million -- came from stock awards, while $9.1 million came from bonuses. His salary was $980,769, and he received an $8 million signing bonus and a $1.125 million "individual performance" bonus.

Valeant said the financial goals it had established at the beginning of the year -- before Mr. Papa took the reins -- weren't "sufficiently achieved" in 2016, but the company paid the new CEO half of the additional cash bonus to recognize "the significance and quality of the contributions" he made. Under the compensation package Valeant offered, the board could have paid Mr. Papa as much as $2.25 million for his performance last year.

Executive pay specialist Mark Reilly, not involved with the company, said he questioned "whether any cash bonus is justifiable" for Mr. Papa given Valeant's current challenges.

Mr. Papa's pay was more than five times higher than what he had earned in 2015 at the helm of Perrigo Co., but less than half of the $141.6 million that Mr. Pearson was paid at Valeant in 2015. Valeant, though, was considered a different company in 2015, when the stock hit an all-time high of $262.52 in August that year. The stock closed Thursday at $10.86.

Mr. Pearson was seen as the architect of a strategy that for years powered Valeant's shares -- dismissing drug research to focus on growing through acquisitions. However, growing debt from the purchases as well as questions about the company's accounting and its relationship with a specialty pharmacy forced the company to restate results and eroded investor confidence in management.

Investors have been watching for signs on how Valeant can boost profitability outside of big acquisitions and large price increases for its drugs. Analysts remain concerned about the company's debt burden and have questioned the strength of its drug pipeline.

Mr. Pearson, who was ousted last year, was paid $72.5 million in 2016. Most of the pay came from a stock award of Valeant shares valued at $60.5 million. Also included was a $10.4 million severance payment, $669,231 in consulting fees and other benefits, according to company filings.

A spokeswoman for Valeant said the company terminated in January a two-year consulting agreement that it struck with Mr. Pearson last year.

The decision came after the company said its board decided in December not to pay a stock award of 3.1 million shares Mr. Pearson had earned under his contract. The spokeswoman said the company "determined not to make further payments due to the circumstances that Valeant finds itself in at this time."

Mr. Pearson's unpaid stock award has a market value of more than $33 million based on Valeant's closing stock price Thursday of $10.86 on the New York Stock Exchange, up 1.4% on the day. A spokeswomen for Mr. Pearson didn't respond to a request for comment.

Since Mr. Pearson's departure, Valeant has been looking to make divestitures. It came close but ultimately failed to seal a deal to sell stomach-drug maker Salix Pharmaceuticals Ltd. to Japan's Takeda Pharmaceutical Co. for $10 billion.

In January, it reached deals to sell $2.1 billion in assets -- three skin-care brands, including its CeraVe line, to French cosmetics giant L'Oréal SA for $1.3 billion, and its Dendreon cancer business to Chinese conglomerate Sanpower for $820 million.

In a February investor presentation, Valeant said all of its announced transactions will generate asset-sale proceeds of about $2.35 billion up front and $350 million in future milestones.

Write to Anne Steele at Anne.Steele@wsj.com and Jacquie McNish at Jacquie.McNish@wsj.com

 

(END) Dow Jones Newswires

March 24, 2017 02:47 ET (06:47 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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