Valeant’s board has become a revolving door of billionaires.
Three months after Bill Ackman (Trades, Portfolio)’s exit, enter John Paulson (Trades, Portfolio). The head of New York-based John Paulson (Trades, Portfolio) & Co. joined as its 11th director on June 14, the company announced Monday.
"The strategic plan to transform Valeant smartly focuses on rebuilding the company's core franchises in ophthalmology, dermatology and gastroenterology while simultaneously using the proceeds from the sale of non-core assets and operating cash flow to de-lever the company," Paulson said in the release. "I am fully supportive of the strategy and leadership team at Valeant."
Paulson held on to his 5.57% stake in the pharmaceuticals company through the sturm und drang surrounding its drug pricing and accounting practices collapsed its stock price in 2015. The price has also refused to budge anywhere positive this year, falling 7.51%, including the 6.4% cheer the market gave Monday on learning of John Paulson (Trades, Portfolio)’s advent.
The investor, who made billions correctly foreseeing the housing market collapse, bought Valeant (VRX, Financial) in 2014 when its price averaged $136 per share. He then made his biggest purchase, totaling 6.95 million shares, in the second quarter 2015 when the price averaged $223. Like Ackman, he nabbed a huge parcel of shares, this time 5.79 million, on the stock’s way down, at an average of $28 per share by then. Calculations place his total estimated loss on Valeant around 86% currently.
Paulson will join Valeant’s efforts to shift from a drug-acquiring, price-hiking, low-R&D-investing juggernaut into a streamlined pharmaceuticals company with a pipeline full of new treatment candidates.
Its strategy since 2016 has been to focus on core businesses, increase financial effiency and strengthen its balance sheet and capital structure, per its latest earnings report. Valeant considers “core businesses” gastrointestinal and dermatology with its Branded Rx Segment, and global eye health within its Bausch + Lomb/International segment. The previous year, Valeant had made three major business acquisitions and three other smaller deals.
So far, Valeant’s primary steps toward its revised goals have included an agreement to a $820 million sale of its segment Dendreon Pharmaceuticals, holder of a vaccine for prostate cancer, and $1.3 billion sale of several skincare brands in January.
On the drug-development front, Valeant increased its spending on research and development by 53% in the first quarter, channeling $421 million into its core businesses. The company ended the first quarter with 100 projects in its pipeline and with plans to launch or relaunch 50 products in 2017.
Valeant and Paulson must still worry about $25.7 billion in leverage, a litany of class-action lawsuits and an upcoming wave of patent expirations for its branded drugs.
