Valeant Pharmaceuticals confirmed on December 28 that CEO Michael Pearson will be taking a medical leave effective immediately, sending shares in the company down as much as 10 percent. The drugmaker recently confirmed that Pearson had been hospitalised due to a case of severe pneumonia. Lead independent director Robert Ingram remarked "out of respect, we will be honouring his family's request for privacy and will not be commenting further on his condition at this time."
Valeant indicated that in Pearson's absence, it has created an office of the chief executive officer, on which general counsel Robert Chai-Onn, chairman Ari Kellen and chief financial officer Robert Rosiello will serve in an interim capacity. Additionally, the drugmaker's board of directors has formed a committee to oversee and support the office of the CEO which will include Ingram, ValueAct Capital president G. Mason Morfit and former Valeant CFO Howard Schiller.
"The board of directors has full confidence in [Chai-Onn], [Kellen] and [Rosiello] to preserve continuity of the Valeant operations and protect the long-term strength of the company while [Pearson] is out," Ingram commented, adding "the committee will be working closely with the entire management team to ensure that the company continues to operate normally while [Pearson] focuses on his health."
Commenting on the news, Morningstar analyst Damien Conover said "it is an inopportune time for their leader to take sick leave after the company has faced credibility issues in recent months," adding "if the company was on solid footing, it wouldn't be as much of an issue." Conover also noted "it is a little unusual to have that sort of operating structure, a panel" to replace a CEO.
Earlier this month, Valeant cut its 2015 sales and earnings forecast and profit forecast for next year following allegations that the drugmaker was using specialty pharmacy Philidor to artificially inflate revenue. The company subsequently severed ties with the pharmacy and later entered into a distribution deal with Walgreens.
Veritas Investment Research analyst Dimitry Khmelnitsky remarked "if the company continues on the path that it's on, they need [Pearson]," adding "when you have a company that has aggressive business practices, you need somebody who is an outside-the-box thinker, who’s willing to take substantial risks." Khmelnitsky suggested that investors will probably react negatively to Pearson’s hospitalisation because he is the company’s architect and key strategist, noting that new leadership could "de-risk" the company and make it more sustainable. However, Mizuho Securities analyst Irina Koffler cautioned "senior management ranks have been relatively unstable at Valeant so there is a very short list of possible successors to Pearson."
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