Endo CEO downplays Valeant link
Endo CEO Rajiv De Silva tried Thursday to distance himself and his company from his former employer, Valeant Pharmaceuticals International, which has been at the center of a controversy over pharmaceutical pricing and accounting practices.
Endo CEO Rajiv De Silva tried Thursday to distance himself and his company from his former employer, Valeant Pharmaceuticals International, which has been at the center of a controversy over pharmaceutical pricing and accounting practices.
Valeant, which has said it has received subpoenas from federal prosecutors, is fending off critics who say it misused a mail-order specialty pharmacy, Philidor RX Services, to inappropriately goose profits and hide inventory. Philidor, whose main facilities are in Hatboro and Horsham, Montgomery County, said last week that it would close in 30 to 90 days. Valeant, which had an option to purchase Philidor before it ended the relationship, has denied wrongdoing.
Valeant, which was a Wall Street darling and promoted heavily by billionaire hedge fund investor Bill Ackman, has seen its stock plummet from $179 a share to $78 in the last month.
Hoping to stop the fall of his own company's stock, Endo International P.L.C.'s De Silva told financial analysts on a conference call Thursday morning that only about 3 percent of Endo's sales go through specialty pharmacies. Although its top two drugs are pain medicines, its third-highest-selling medicine is a specialty drug administered through injection.
"Endo does not have any ownership interest in, consolidated financial results of, or have any affiliation with any specialty pharmacy," De Silva said in his opening remarks. "The specialty pharmacies we utilize are independent or are part of other companies. We recognize revenues when Endo ships to a specialty pharmacy and it takes title of the product, just as we would with any other distributor."
De Silva was appointed Endo CEO in March 2013. Before that, he worked for Valeant CEO Mike Pearson, serving as president and chief operating officer. According to his Endo biography, De Silva was "responsible for all specialty pharmaceutical operations, including sales and marketing, research and development, manufacturing and business development" at Valeant. Like Pearson, De Silva was among the leaders of McKinsey & Co.'s pharmaceutical group.
Within the last month, Endo shares have fallen 25 percent from a high of $69.02.
Specialty pharmaceuticals are loosely defined, but they are often costly, complex or injectable, and they require more handling. Some doctors buy and administer such medications, taking a slice of profit along the way. Drug firms like the name because it helps justify higher prices.
Valeant has grown by buying other companies while spending less on its own research, and it has targeted acquisitions looking for specific products. Early in 2015, a day after buying from Marathon Pharmaceuticals two injectable heart drugs that had been used for decades, Valeant raised the prices 525 percent and 212 percent, according to the Wall Street Journal.
Anticipating analysts' questions on whether Endo's business model is too dependent on price hikes, De Silva said Thursday that price increases company-wide had not exceeded 5 percent. "We believe our branded pricing strategies are rational and appropriate," De Silva said.
Officially headquartered in Quebec, Valeant has its U.S. headquarters in Bridgewater, N.J. Endo's leaders still work from an office in Malvern, though it is officially registered in Ireland to avoid paying higher U.S. corporate taxes.
After telling the Journal on Wednesday that he questioned at one point whether Valeant's Pearson was the right person to be CEO, Ackman tried to help Pearson - and stop billions in losses - with a letter offering support.
"While I have strong views on Valeant's communication strategy and would have taken a different approach, you and the board should not interpret this as a negative reflection on my view of you as the CEO of the company," Ackman wrote in the letter, provided by his public relations firm.
The email didn't help Valeant's stock price Thursday and the downdraft took Endo lower, too. Valeant closed at $78.77, down 14.36 percent. Endo closed at $51.70, down 14.53 percent.
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