- Valeant plans to pay off an additional $125 million in debt this week, exceeding a goal to pay down $5 billion in debt by February 2018, CEO Joe Papa says.
- "We've over-delivered on strong cash flow, and we were also able to sell assets at double-digit multiples," Papa tells CNBC
The news flow around once-embattled drugmaker Valeant has been quiet lately. And that may be exactly what CEO Joe Papa is aiming for.
But on Tuesday, he said Valeant plans to meet a major milestone this week: It will pay off an additional $125 million in debt, exceeding a goal set in August 2016 to pay down $5 billion in debt by February 2018. The company still has a significant debt load — more than $26 billion — but no obligations until 2020, Papa said in an interview.
"We've over-delivered on strong cash flow, and we were also able to sell assets at double-digit multiples," Papa told CNBC.
The company has divested the cancer drug Provenge, skin-care businesses Obagi and Cerave, and a unit called iNova to aid in its debt sales. The Obagi sale hasn't yet closed and isn't included in the debt paydown announced Tuesday.
The moves come after a tumultuous year for Valeant that saw its stock crater from a high of more than $250 a share in mid-2015 to less than $10 as the company's business practices came into question. Valeant was held up, along with Martin Shkreli, as an example of excessive drug price increases, and its management resigned. Its debt obligations have weighed heavily on the stock.
Valeant shares are still trading at a tiny fraction of their all-time high, closing Monday at $11.41.
Papa emphasized that as Valeant divested units, it was able to keep its "core" franchises: the Bausch + Lomb eye care business, the Salix unit in gastrointestinal products, and its dermatology unit.
"We did get some inbound interest" on those assets, Papa said. "We have to listen because we still have a lot of debt," but the company wouldn't sell them for less than it perceives them to be worth, he said.
Some of Valeant's asset sales did come at prices lower than what the company originally paid for them: Obagi's sale, announced in July for $190 million, was at least $150 million less than what Valeant paid for it in 2013. But Valeant acquired Provenge-maker Dendreon out of bankruptcy in early 2015 for $495 million, and in January announced its sale for $820 million.
Papa said "the metrics are reset" in terms of assets. The previous management team, led by CEO Mike Pearson, built the company through a series of acquisitions at valuations many now question.
As for Valeant's future growth, Papa said acquisitions aren't the plan.
"Right now we're really focused on growing our business organically," he said. Drug price increases will be limited to less than 10 percent a year.
"We're really excited about the progress we've made."