Valeant Pharmaceuticals Inc. this week announced the first of what chairman and CEO Joseph Papa has promised will be a string of asset sales to help the company chip away at a mountain of debt. The announcement so far has failed to move the needle on the troubled Bausch & Lomb parent’s lagging stock price.
The Quebec-based firm this week announced two deals worth a combined $2.1 billion: a sale of the CeraVe AcneFree and Ambi skin-care brands to L’Oréal USA Inc. for $1.3 billion and the sale of its stake in Dendreon Pharmaceuticals Inc. to the Chinese conglomerate Sanpower Group Co., Ltd. for $819 million.
Valeant is working to pay off $31 billion in debt.
Papa took over at Valeant last spring after the departure of former chairman and CEO Michael Pearson.
A onetime McKinsey & Co. consultant, Pearson began his tenure at Valeant with a series of costly acquisitions, including the 2013 $8.7 billion purchase of Bausch & Lomb. The acquisition for a time made him a Wall Street darling, but it also piled up debt.
Pearson’s term as Valeant CEO ended last year with his resignation after a series of scandals rocked the company and drove down its stock price.
After rising from the $15 range to close at $16.40 Tuesday on news of the asset sales, Valeant shares (NYSE:VRX) by midday Wednesday were down 89 cents to $15.51. That is a 163 percent plunge from the $260 price the stock fetched in mid-2015 before scandal rocked the company.
Ills plaguing Valeant include an ongoing Securities and Exchange Commission probe of its accounting begun after the firm restated 2104 results, a criminal indictment of a former executive, and congressional and Justice Department investigations into the firm’s pricing policies.
As a first order of business, Papa vowed to sell off non-core assets to reduce debt, which was harder to maintain without the cushion of Valeant’s once soaring stock price.
Pearson’s departure came shortly after activist investor William Ackman hinted that Valeant might need to sell Bausch & Lomb. Ackman’s Pershing Square Capital Management LLP hedge fund then held a 9 percent stake in Valeant. After selling some 3 million shares last month, Ackman has reduced Pershing Square’s stake in Valeant to 7.8 percent.
Bausch & Lomb for the moment seems not to be in play.
Ackman, who now is a member of Valeant’s board, has backed away from suggestions of a Bausch & Lomb sale, while Papa has praised Bausch & Lomb as a core franchise that Valeant wants to keep.
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