Embattled Valeant (VRX) to Offer Cash and Stock to Keep Anxious U.S. Employees
LAVAL, Quebec – Embattled Valeant Pharmaceuticals International Inc. (VRX) is offering stock and cash incentives in an effort to keep key employees from jumping to another company, Reuters reported this morning.
A Valeant spokesperson told Reuters that approximately 70 employees “below the executive level” have been offered incentives to stay with the company. It is likely more employees will receive similar offers, Laurie Little, head of investor relations at Valeant, told Reuters. Most of the employees receiving the offer are U.S. employees. Employees in other countries are feeling “less pressure” because Valeant is known by other company names overseas, Little said.
“Through this turmoil, we definitely don’t want to see an exodus,” Reuters cited Little as saying.
Valeant’s stock is up about 5 percent this morning, trading at $76.70 per share. Since a high of $259.98 per share price on Aug. 4, Valeant’s stock has plummeted to a year-low of $72.38 per share.
For months Valeant has been in the spotlight as it fended off criticism for price gouging and its relationship with specialty pharmacy Philidor Rx Services that has drawn allegations of falsely inflating revenues, earning the company the moniker of the “pharmaceutical Enron,” by short-selling group Citron Inc. Enron, an energy giant, collapsed following reports of accounting scandals in 2001.
In an October release, Citron Research decried Valeant for its “unsavory business practices of massive price raises on pharmaceuticals acquired in a rapid succession of acquisitions, while slashing research and development.” Additionally, the Citron report criticized Valeant’s relationship with Pennsylvania-based Philidor Rx Services, a specialty pharmacy acquired by Valeant last year. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company. Some who are critical of the “prescriptions made easy” practice prevents patients and insurance companies from switching to cheaper alternative prescriptions and serves to pad the bottom lines of companies such as Valeant. In October, Valeant severed ties with Philidor. J. Michael Pearson, Valeant’s chief executive officer, said Philidor accounted for 6.8 percent of Valeant’s revenue during the third-quarter.
Pearson came to Valeant in 2008 and under his leadership expanded the company through aggressive mergers and acquisitions, taking over companies like Salix Pharmaceuticals, Ltd. (SLXP) and Bausch & Lomb. Under his leadership, revenue has grown seven-fold and stock prices had soared, until earlier this year when the company’s troubles came to light. Pearson has also been under pressure by some investors, particularly Bill Ackman, the company’s third-largest shareholder, who has been critical of Pearson and the company’s crisis communications strategy, before ultimately expressing his support for the CEO.
In addition to criticism of the relationship with Philidor, Valeant is also facing scrutiny from U.S. lawmakers and two U.S. attorney’s offices over pricing of drugs acquired through acquisitions. Valeant is under fire for a price increase of two recently-acquired cardiac drugs, Nitropress and Isuprel, after the company acquired Salix Pharmaceuticals, Ltd. (SLXP). Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
In addition to the two cardiac drugs, Valeant has also been criticized for quadrupling the price of the 55-year-old drug Cuprimine, used in the treatment of Wilson disease. A New York Times article excoriated Valeant for its practice of increasing the price of drugs following an acquisition. According to a Deutsche Bank (DB) report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors, the Times said. Valeant, the article says, spends only about 3 percent of sales generated revenue on research and development, “which it views as risky and inefficient compared with buying existing drugs.” That amount was about $246 million in 2014.
One of Valeant’s newest acquisitions, Raleigh, N.C.-based Sprout Pharmaceuticals, the maker of Addyi, a female sexual desire drug, has been underperforming with only 227 prescrptions in the first few weeks it’s been available by prescription. Valeant acquired Sprout for $1 billion just days after Addyi was approved by the FDA. When the deal was announced, Pearson said the acquisition of Sprout will allow Valeant to “establish a new portfolio of important medications that uniquely impact women.”
11/19/2015 5:44:00 AM
November 19, 2015
By Alex Keown, BioSpace.com Breaking News Staff