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As if Joe Papa doesn’t have enough problems.

The Valeant Pharmaceuticals chief executive is grappling with numerous government probes into the company’s accounting and pricing practices; its business strategy is in turmoil; assets are being sold to ward off bondholders and its stock is tanking, again.

Now, the US Food and Drug Administration has sent a warning letter that notes the company is having manufacturing problems that reflect an inability to integrate some of the products that have been scooped up as a result of its many acquisitions. The Nov. 3 letter was posted today on the FDA web site.


The letter describes how a Valeant production plant in Rochester, NY, which mostly makes products for the Bausch + Lomb division, experienced various problems with the OraPharma ONSET Mixing Pen, a compounding and dispensing device used for mixing two solutions together.

The problems described in the letter, which were noticed during an inspection this past summer, are technical in nature, such as a failure to establish and maintain procedures for validating device design, and implementing corrective and preventive actions when production goes awry.


But one passage jumps out. The FDA writes that Valeant’s “organizational structure has not assured that acquired products are adequately integrated into your quality management system.” Valeant acquired OraPharma in 2012.

This is not surprising. Valeant has acquired numerous companies over the years and integrating operations is never easy, but production problems appear to be mounting. Last July, the FDA bounced an application for a new eye drop after finding manufacturing gaffes at a plant in Tampa, Fla.

Wall Street analysts noted the developments are symptomatic of a now-disgraced strategy – after buying companies, which involved using a lot of debt, Valeant would jack up product prices and simultaneously cut back on costs, notably R&D and production.

For a time, this made the company a Wall Street darling. Now, though, Valeant has hit another obstacle that must be overcome — ongoing manufacturing problems that have drawn consistent attention from the FDA. This is just one more problem for Papa, who was hired last April to affect a turnaround.

“In hindsight, the quality control issues that are coming to light should not be all that surprising,” wrote Piper Jaffray analyst David Ansellem in an investor note this morning, “given the Draconian cost cuts undertaken by the prior senior management team.”

On a conference call this morning, Valeant executives maintained that problems cited by the FDA at the Rochester facility should not impact production or shipments. Specifically, Papa said that “as I mentioned we take theses matters very seriously and work with the FDA to respond to the warning letter and resolve as soon as possible.

“I want to make clear, though, it does not impact the production or sales of any of our Bausch + Lomb products or anything at the site. It is specific to some medical devices that are the registrations at the site and, as such, they were specific to those medical devices, but it does not relate to the manufacturing of the contact lenses and other products at the Bausch + Lomb site in Rochester, New York.”

But he did not address the systemic issues cited in the letter. A Valeant spokesman declined further comment.

This post was updated to include Papa’s remarks and the reaction from a Valeant spokesman.