Cantillon: Valeant swipes Papa from Perrigo

Perrigo, the over-the-counter drugs specialist that moved its domicile to Ireland when it took over the rump of Elan's business in 2013, is losing its chief executive just as the company is trying to recover from its bruising battle with rival Mylan.

Joe Papa has been tapped by rival Valeant to fill the shoes vacated by Mike Pearson, the larger-than-life Canadian who built up the business through a rapid programme of expansion and leveraging value from older drugs while stripping out R&D costs.

Valeant, of course, ran out of road last year when questions about its business practices, drug pricing and accounting emerged just as Pearson was forced to step back due to illness.

For Papa, it seems very much a case of jumping from a lukewarm frying pan straight into the fire.

Perrigo itself is struggling to recover the confidence of investors after digging in its heels and seeing off the unwanted attentions of Mylan, but it retains a solid core business projected to deliver double-digit medium-term gains.

Still, sentiment will hardly have been helped by yesterday’s news that first-quarter sales and earnings will be appreciably below expectations and that forecasts for the full year have been significantly pared back.

That pales into insignificance, however, alongside the challenge of restoring Valeant’s reputation and fortunes, especially in a climate when it will be a seller, not a buyer, of businesses.

What Papa brings to the party is a depth of experience from over 30 years in the business and, presumably, appreciable powers of persuasion, having persuaded shareholders to reject the persistent advances of Mylan.

What’s not evident on his CV is any expertise in turning a business around. He leaves Perrigo in the midst of just such an exercise but the challenge at Valeant is altogether more difficult.

If markets are any guide, the view is that the appointment is marginally positive for Valeant – whose shares edged up over 1 per cent on the news yesterday but still languish around 80 per cent below peak.

Conversely, it is seen as sharply negative for Perrigo, where the shares slumped over 15 per cent at lunchtime yesterday as they continue to test lows not seen since the start of 2013.