Valeant Taps Interim CEO While Michael Pearson Remains Hospitalized
January 6, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Valeant Pharmaceuticals tapped Howard B. Schiller, the company’s former chief financial officer as its interim chief executive officer while current CEO Michael Pearson remains hospitalized with pneumonia, the company announced this morning.
“As Mike's medical leave continues, and the timing of his recovery and return remains uncertain, Howard will now step in as CEO on an interim basis. Howard's performance as Valeant's CFO, as well as his deep understanding of Valeant's operations, are excellent and we are grateful that he has agreed to take on this role. The Board will continue to work closely with Howard and the other members of the senior management team to implement Valeant's strategy successfully in Mike's absence,” Robert Ingram, the company’s lead director said in a statement.
On Tuesday, Reuters reported the company was looking at tapping an interim CEO while Pearson recovered, which sent Valeant down 7 percent in after-hours trading.
Pearson was hospitalized last week with a case of severe pneumonia and the company tapped an interim committee dubbed the Office of the Chief Executive Officer.
This has been a tough year for Pearson, who has watched the company’s market share decline, despite leading it through several acquisitions. Pearson came to Valeant in 2008 and under his leadership expanded the company through aggressive mergers and acquisitions, taking over companies like Salix Pharmaceuticals and Bausch & Lomb. Under his leadership, revenue has grown seven-fold and stock prices had soared, until earlier this year when the company’s troubles came to light. Pearson has also been under pressure by some investors, particularly Bill Ackman, the company’s third-largest shareholder, who has been critical of Pearson and the company’s crisis communications strategy, before ultimately expressing his support for the CEO.
Pearson’s illness and the tapping of Schiller comes at a tough time for Valeant as it seeks to calm investors after an accounting scandal and regain some market share after a difficult few months that saw the stock lose more than half of its value. Valeant’s stock closed Tuesday at $101.03 per share after having been as low as $70.32 per share only a few weeks before. The stock had regained some ground, climbing back to $118.47 last month, still that was far lower than the $262.52 per share the company was trading at in August.
The company’s largest stock holder William Ackman’s Pershing Square Capital Management, sold about 5 million Valeant shares on the last trading day of 2015 underscoring some of Valeant’s troubles.
During a December Valeant shareholder’s meeting, Pearson pledged to be more transparent when it comes to data about company business and performance of its approved drugs. At the same time, Bloomberg described him as being more defiant when it comes to company strategy, which has largely been based on mergers and acquisitions, as well as the use of specialty pharmacy companies. Another move that helped endear Pearson’s leadership to shareholders were some recent moves, including a deal with Walgreens to sell of its branded products at a 50 percent discount. The company said it will sell some of its name brand products used for “dermatology, ophthalmology, gastrointestinal and neurology/other therapeutic areas” at generic prices, if there are generics of that drug. Additionally, Valeant will reduce all of its dermatological and ophthalmological products by 10 percent in Walgreens.
Despite that growth though, Valeant has been under attack for the pricing of some of its drugs, as well as its relationship with the specialty pharmacy company Philidor Rx Services that has drawn allegations of falsely inflating revenues, earning the company the moniker of the “pharmaceutical Enron,” by short-selling group Citron Inc. In an October release, Citron Research decried Valeant for its “unsavory business practices of massive price raises on pharmaceuticals acquired in a rapid succession of acquisitions, while slashing research and development.” Additionally, the Citron report criticized Valeant’s relationship with Pennsylvania-based Philidor Rx Services, a specialty pharmacy acquired by Valeant last year. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company.
Valeant is also facing scrutiny from U.S. lawmakers and two U.S. attorney’s offices over pricing of drugs acquired through acquisitions. Valeant is under fire for a price increase of two recently-acquired cardiac drugs, Nitropress and Isuprel, after the company acquired Salix Pharmaceuticals, Ltd.. Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
In addition to the two cardiac drugs, Valeant has also been criticized for quadrupling the price of the 55-year-old drug Cuprimine, used in the treatment of Wilson disease. A New York Times article article excoriated Valeant for its practice of increasing the price of drugs following an acquisition. According to a Deutsche Bank report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors, the Times said.