A dose of Mylan stock could turn out to be toxic for Perrigo’s chief executive. Joseph Papa owns more than $200,000 worth of shares in his drug company’s hostile suitor. That’s at least hypocritical, given his contention that Mylan is a lousy investment. It’s also a prescription for serious conflicts of interest.
Papa acquired most of his Mylan shares on March 12, two days after a media report that Israeli drugmaker Teva Pharmaceutical was poised to make a bid for the Dutch company. It looked like a smart investment after Teva announced its offer in April. Things turned sticky, however, when Mylan responded with its unsolicited $27 million approach to Perrigo.
Papa’s stake is peanuts compared with his $18 million in compensation from Perrigo last year. Holding onto the stock may also make sense at this point. Selling it in the middle of a rancorous takeover battle would look bad, and could be legally improper.
Yet the CEO has led the charge against Mylan’s bid, harshly criticizing the company’s corporate governance and arguing that its core business is headed for trouble. The disclosure of his ownership won’t help the credibility of his case.
What’s more, Papa is an industry insider. Trading on his deep knowledge of the drug making business may not be illegal, but it certainly looks dodgy. The best remedy is for him and other executives to eschew any stake in rivals.