Weekly Wreck

Valeant Pharmaceuticals International - Troubled Past, Troubled Present

Canadian Pharmaceutical firm, Valeant Pharmaceuticals [VRX] continues to try to escape the misdeeds of its past. After losing 90% of its value in 2016 as well as its CEO, Valeant managed to make small positive gains in 2017 with significant gains in its stock price.

The combination of a possible settlement for the insider trading case it shares with Pershing Square as well as continued asset sales to pare down debt all point to a company moving in the right direction, even if it will never achieve the stock price heights it had in early 2016.

As the company slowly turns things around it’s worth looking back to see what went wrong and possible risks that still exist. As to what went wrong the short answer is the company was much too aggressive under former CEO Michael Pearson. Too many acquisitions and potentially questionable ethics in those transactions would appear to be another part of the problem. Pushing drug price increases too far and too fast for insurance companies and users to accept. All while upsetting the politicians and regulators with a tax inversion to Canada.

What drives a company to takes these risks? While many factors are at play the most obvious are executive stock options. When the CEO's pay can increase by large amounts with each increase in the stock price it should come as no surprise that the CEO will go to great lengths to capture this increase. Indeed with $62,717,846 in total compensation to new CEO Joseph C. Papa, the majority in stock and options, some of these risks would seem to still be with the company.