The disgraced pharma company tries to stay afloat.
Sometime in 2007, the Board of Directors for Valeant Pharmaceuticals contacted the head of McKinsey’s Pharmaceutical practice to help it devise a new strategy. The company had been founded in 1960 by a former Nazi resistance fighter from Yugoslavia who would ultimately be engaged in legal battles with Slobodan Milosevic, make a series of false claims about the benefits of a Valeant drug, and fathered a son with his secretary.
From the time the founder, Milan Panic, was forced out of Valeant until 2007, the company had drifted with little sense of identity or vision. Mike Pearson, the McKinsey consultant that the Board contacted, would give it one. He told the Board that they should focus efforts on niche areas that would not draw competition from large pharmaceuticals as well as cut unproductive research and development costs and instead buy products from other companies after the research had been proven.
The Board was so captivated by Pearson that it offered him the position of CEO in 2008 to implement the changes he proposed and set in motion events that over the next eight years would result in a ten times increase in revenue, several dozen acquisitions, a Congressional investigation, and fortunes and reputations made and lost.
Under new leadership today in the form of Joseph Papa, Valeant may be turning the corner on the road to financial health. The company has sold non-core assets and harvested cash to pay some of its debt, leaving it with a still sizeable $26.4 billion load.
After its most recent quarterly results, in which the company reported lower sales and lower profit, investors still bid up the shares by 8%, presumably the result of short covering or because of the progress made in retiring debt.
Valeant and its CEO still have a big mountain to climb, but the peak is becoming clearer to observers.
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