Valeant Plummets After Revealing Jaw-Dropping Payday for Its CEO
April 5, 2017
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Shares of Valeant Pharmaceuticals (VRX) have fallen steadily over the course of this week after the company revealed the astronomical compensation Chief Executive Officer Joseph Papa earned over the past year – $62.7 million in combined salary, bonuses and stock options.
The company justified the pay in a recent filing with the U.S. Securities and Exchange Commission, saying Papa’s pay package “reflects appropriate and customary terms for recruiting a sitting CEO at a major company,” The Street reported Tuesday. Papa was brought on as Valeant’s CEO in April 2016, which means his earnings were for eight months. Over those same eight months, shares of Valeant have fallen more than 65 percent. In its filing, the company pointed to some of his accomplishments during that time period, including establishing a new leadership team at the beleaguered company that has been surrounded in controversy, as well as improving relationships with shareholders and customers like Walgreens, according to The Street’s report.
Much of Papa’s earnings, about $52 million, are tied to Valeant’s stock. That means he has a vested interest in making sure Valeant does as well as it can in the marketplace. However, the company has been beset by problems for nearly two years—problems that predate Papa’s coming on board.
Valeant has been under investigation by the U.S. attorney’s office in New York since last year following news of the Philidor accounting practices became known. Problems with Valeant and Philidor were first raised by short-selling firm Citron Research, which called the Canadian company the “pharmaceutical Enron.” In November, two former Valeant executives, Michael Pearson and Howard Schiller, were under investigation for their possible roles in the Philidor scandal. Not only has Valeant been probed due to its Philidor relationship, the company is also scrutiny from U.S. lawmakers and two U.S. attorney’s offices over pricing of drugs acquired through acquisitions.
Valeant has also been dealing with a massive debt load it’s carrying, all while revenues are declining. The company has been attempting to offload some of its assets to pay down that debt. Earlier this year, Valeant sold off equity interests in Dendreon Pharmaceuticals, Inc., the manufacturer of prostate cancer drug Provenge, to China’s Sanpower Group Co., Ltd. for about $820 million.
The company also took a hit when one of its largest investors, Bill Ackman, unloaded nearly $3 billion worth of shares in Valeant. Although a once staunch defender of Valeant, in hindsight, Ackman said he http://www.businessinsider.com/when-bill-ackman-shouldve-sold-valeant-2017-3 of Valeant in 2015 when the Philidor scandal was revealed.
The disclosure of Papa’s pay comes about a week after former CEO J. Michael Pearson accused the drugmaker of failing to deliver 3 million shares promised him as part of an exit package. He has filed a lawsuit seeking those monies, plus consulting fees he claims to be owed. Valeant responded to Pearson’s litigation by citing Pearson’s poor performance and his dismissal as reasons not to pay, The Street said.
Shares of Valeant continue to fall this morning. Stock is down more than 4 percent, trading at $9.70 per share as of 10:48 a.m.