Valeant Hunts for a New CEO, Blames Former CFO Schiller for Recent Financial Misstatements
Published: Mar 21, 2016
March 21, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – J. Michael Pearson is out at Valeant Pharmaceuticals and the company is looking for a new chief executive officer.
The embattled company announced this morning that the board of directors initiated a search for a new CEO to replace the recently returned Pearson at the helm of the company. Robert Ingram, chairman of Valeant’s board of directors, said he believes the company “will be able to rebuild its reputation and thrive under new leadership.” Pearson will continue to serve as CEO until his replacement has been found, Valeant said in its announcement.
"It's been a privilege to lead Valeant for the past eight years," said J. Michael Pearson, chief executive officer. "While I regret the controversies that have adversely impacted our business over the past several months, I know that Valeant is a strong and resilient company, and I am committed to doing everything I can to ensure a smooth transition to new leadership,” Pearson said in a statement.
Bill Ackman, one of the largest investors in Valeant and a recent appointee to the company’s board of directors, said he was going to take a more active role in company leadership. Ackman has also threatened to replace Valeant leadership if they do not turn the company around. This morning Ackman said he looked forward to identifying new leadership for Valeant.
The move is not totally surprising given the difficult eight months Valeant has had, which included a loss of about 80 percent of its stock value since August 2015. Valeant has been embattled by for months. What once was seen as a strong performer in the market due to its aggressive mergers and acquisitions, may now seem like only a shell of itself to investors. In August, Valeant stock was trading as high as $263.70, but accounting concerns over its specialty pharmacy company Philidor Rx Services and other issues have negatively impacted the company. Valeant shares hit a low of $25.98 per share on Friday. Stocks continued to plunge last week after Valeant said a delay in filing its annual report might mean the company would be in peril of defaulting on $30 billion in debt. If the company does not file its annual 10-K report with the U.S. Securities and Exchange Commission by its deadline, the company could default on some of its debt. That news followed Valeant announcing in February that said it believes approximately $58 million of net revenues reported in the second half of 2014 “should not have been recognized upon delivery of product to Philidor.” Correcting the misstatements is “expected to reduce reported 2014 GAAP EPS by approximately $0.10 and increase 2015 GAAP EPS by approximately $0.09,” Valeant said, which is part of the reason the company was forced to delay filing its financial reports.
In its announcement this morning, Valeant placed the blame on Howard Schiller, the company’s former chief financial officer, who briefly served as interim-CEO while Pearson battled pneumonia. The company said the “improper conduct” of Schiller resulted in the provision of incorrect information to the company and “contributed to the misstatement of results.” Valeant also blamed top executives for the company’s recent woes. Valeant said “the tone at the top of the organization and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company's improper revenue recognition.” Valeant laid out its finances in a recent regulatory filing with the U.S. Securities and Exchange Commission.