By Vipal Monga 

Valeant Pharmaceuticals International Inc. largely completed a makeover of its top ranks on Monday by hiring drug-industry veteran Paul Herendeen as its new chief financial officer. Now comes the hard part: execution.

"It's going to be a cleanup role," said Louise Chen, an analyst for Guggenheim Securities, referring to Mr. Herendeen's task at the embattled Canadian drugmaker. "The first thing they have to do is string together a couple of good quarters," she said.

In his new post, the 60-year-old executive, which Valeant lured away from animal-health giant Zoetis Inc., succeeds Robert Rosiello, who will stay on as head of corporate development and strategy. The Wall Street Journal first reported the change in Valeant's executive lineup on Sunday night.

Mr. Herendeen's appointment continued a management shakeup at Valeant, which hired a new chairman and chief executive this spring, named a new general counsel earlier this month, and has expanded its executive committee and given some of its senior executives bigger roles.

On Monday, Valeant's stock, which traded above $260 a share last year, was at $31.28, up 8.8%, in midafternoon New York trading. The company's market value fell sharply over the past year as its strategy of acquiring drugs and sharply raising their prices, as well as its accounting practices, came under heavy scrutiny from regulators and investors.

Earlier this year, Valeant had a close brush with defaulting on some terms of its debt, because it was late to file its annual report.

The company has since been sued by shareholders and faces an investigation by federal prosecutors into whether it defrauded insurers by obscuring its ties to a mail-order pharmacy that boosted sales of its drugs. Valeant has said it has been cooperating with the investigation.

In an interview with The Wall Street Journal, Mr. Herendeen said he is walking into Valeant with eyes wide open. "In no way do I want to minimize the challenges facing the company and the potential for other things to go bump in the night," he said. "As a new team we need to look back and deal with this."

He emphasized that he took the job because he saw potential in the turnaround effort led by Joseph Papa, who became Valeant's chief executive in April.

Mr. Herendeen cited Valeant's heavy debt burden as an immediate source of concern, because it limits the company's options. The drugmaker has more than $30 billion of long-term debt on its balance sheet.

Mr. Papa has said the company will sell assets to reduce its debt load. He has had success in recent weeks amending some terms of that debt to give Valeant more leeway in managing its cash.

But the company is still struggling with the fallout from its accounting troubles. T. Rowe Price Group Inc. filed a lawsuit against it last week, alleging that Valeant engaged in "a fraudulent scheme" that cost shareholders billions of dollars.

"Valeant intends to defend itself and cannot comment further on ongoing litigation," a company spokeswoman said of the lawsuit.

Earlier this month, the company reaffirmed its earnings forecast for the year following a string of reductions, and analysts upgraded their rating of the stock.

Mutual-fund giant Fidelity has also sharply boosted its stake this year.

Mr. Papa said in an emailed statement that he hired Mr. Herendeen because of his "strong operational focus and disciplined approach to financial management." Mr. Herendeen, a hockey enthusiast, added that he didn't leave Zoetis because of any issues with the animal-health company, which he came out of retirement to join two years ago. Rather, he said, success in turning around Valeant could be a capstone to his career.

Before his stint as Zoetis's CFO, Mr. Herendeen was finance chief at drugmaker Warner Chilcott PLC, which he helped sell to Actavis Inc. in 2013. Warner Chilcott was purchased by a consortium of private-equity firms in 2005, and Mr. Herendeen helped manage its debt-heavy balance sheet.

Mr. Herendeen said his selection for the Valeant post follows a summertime interview process that included lengthy conversations with Valeant's Mr. Papa and Mr. Rosiello.

Mr. Herendeen shepherded Zoetis through costs cuts, acquisitions and a brush with activist investor William Ackman, who bought into the company in 2014. Mr. Ackman is also an investor in Valeant and a board member, but he didn't speak directly with Mr. Herendeen about his appointment.

Shares of Zoetis have risen almost 50% since he joined it. Late on Sunday, the company said it would name Glenn David as its new finance chief. Mr. David had previously served as interim CFO at Zoetis before Mr. Herendeen's arrival.

Write to Vipal Monga at vipal.monga@wsj.com

 

(END) Dow Jones Newswires

August 22, 2016 15:17 ET (19:17 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Valeant Pharma (NYSE:VRX)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Valeant Pharma Charts.
Valeant Pharma (NYSE:VRX)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Valeant Pharma Charts.