Valeant CEO Steps Down, Ackman on Board
J. Michael Pearson has stepped down as CEO of Canada-based Valeant Pharmaceuticals two months after returning from a medical leave, as the company’s stock continues to bleed. One of the company’s directors also has resigned and has been replaced with activist investor William Ackman.
Shares of the drugmaker fell to less than a tenth of their peak in summer 2015 on news of the CEO’s impending departure before rallying slightly on news of Ackman’s appointment.
The activist investor’s Pershing Square Capital Management holds a 9% stake in the company that is run from the US despite being based in Canada. Pershing Square already has another representative on Valeant's board.
It was not immediately clear whether Pearson is jumping ship or being pushed, but according to US media reports, Ackman recently told his hedge fund managers that Pershing will “take a much more proactive role” at Valeant to “protect” its investment.
According to the reports, Pearson will remain on board until a successor is appointed. US media have reported also that Howard Schiller, the company’s former chief financial officer who served as interim CEO during Pearson's medical leave and currently has a director’s seat, has been asked to leave but has refused to do so.
Valeant's stock skyrocketed last year as it went on an acquisition strategy spree and also joined the growing list of companies buying older drugs and hiking their prices. More recently, the company has run into massive problems, leading to the severe deterioration of its value.
In addition to high debt levels, the drugmaker is being subjected to a US federal government audit of its accounting and pricing practices, as well more than one Securities and Exchange Commission (SEC) investigation.
Among other things, the SEC is looking into issues at Salix Pharmaceuticals, bought by Valeant for $11 billion in 2015. The Canadian company is also under US Congressional scrutiny about its former relationship with mail-order pharmacy Philidor. It has been accused of using the pharmacy to falsify sales and drive selling prices.
Under pressure from authorities and in view of its share price erosion, Valeant said in November 2015 it was in the process of severing ties with Philidor and would possibly evaluate ties to four other pharmacy groups with which it had “similar relations.”