Skip to main content

Valeant Pharmaceuticals International CEO Michael Pearson

Ryan Remiorz/THE CANADIAN PRESS

Valeant Pharmaceuticals International Inc. is poised to revisit one of the darkest chapters of its past after emerging as the sole bidder for Serbia's state-owned drug manufacturer, Galenika AD.

Earlier this month, the Serbian government announced that Valeant, the largest publicly traded Canadian-based drug company, was the only one of five prospective bidders to meet the criteria laid out in a call for tenders in January. Montreal-based Valeant has until the end of the month to indicate whether it intends to proceed with a deal, according to Serbian news reports. The company declined to comment on its intentions.

The purchase of money-losing Galenika would add to Valeant's list of more than 50 deals since the 2010 merger between Valeant, then based in the U.S., and Ontario-based Biovail Corp., paid for largely with borrowed money, and would build on the company's other recently purchased assets in Eastern Europe.

Story continues below advertisement

"Maybe they see poorly mismanaged assets they can get some accretion from," said Annabel Samimy, an analyst with Stifel Nicolaus in New York.

The purchase of Galenika would also reunite two entities whose previous relationship was torn apart in a major diplomatic and international commercial spat 14 years ago, stemming from bad blood between two Serbian politicians at the outset of the Balkan wars.

On the eve of Yugoslavia's disintegration in 1991, Valeant's predecessor, California-based ICN Pharmaceuticals, formed a joint venture with the Serbian government to purchase control of Galenika. At the time, the deal was a homecoming of sorts for ICN founder and chief executive Milan Panic, who defected to the United States in the mid-1950s and built the company into a modest international success.

In 1992, at the invitation of then-Serbian president Slobodan Milosevic, Mr. Panic became prime minister of Yugoslavia. But their relationship soured when Mr. Panic ran against Mr. Milosevic in Serbian presidential elections that year, and lost (a contest Mr. Panic's campaign manager accused Mr. Milosevic of stealing).

With Yugoslavia subject to sanctions and in a state of significant economic and political volatility, ICN found itself heavily exposed: Galenika's operations accounted for more than 44 per cent of ICN's sales and 50 per cent of operating profits in the mid-1990s, according to U.S. Securities and Exchange Commission reports at the time.

In February, 1999, the Milosevic government nationalized Galenika, sending in armed police and troops to seize ICN's headquarters near Belgrade, forcing out managers and detaining a senior executive for days.

The U.S. government condemned the move and Mr. Panic urged then-president Bill Clinton, in an open letter published in The New York Times, to help settle the dispute. "There can be no doubt that this was an economic and politically motivated power play intended to foment anti-American sentiment [on the eve of Kosovo peace talks]," Mr. Panic wrote.

Story continues below advertisement

The case moved to an arbitration panel before the International Chamber of Commerce, which ruled in November, 2004, that Serbia must return the company's initial investment in the joint venture; Serbia repaid $34-million in an agreed settlement to the company, now known as Valeant.

By then, Mr. Panic was no longer around the savour the victory. After years of disappointing results, unfocused strategic moves and regulatory sanctions, he was deposed in 2002 when dissident shareholders voted enough directors onto the board to oust him as CEO.

When his successors fared little better over the next five years, the board brought in senior industry consultant Michael Pearson to devise a fresh strategy for the company. He was eventually hired as CEO to chart Valeant's acquisition course, culminating in the Biovail deal.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies