Valeant Pharmaceuticals International Inc. Chief Executive Officer Michael Pearson is taking a medical leave of absence, putting management of the embattled drugmaker in the hands of a team of executives.
In a statement Monday, the company gave no update on the condition of Pearson, who was hospitalized last week with a severe case of pneumonia. The shares sank 8.7 percent to $ 104.14 at 10:16 a.m. in New York.
Michael Pearson
Photographer: Scott Eells/Bloomberg
Pearson's illness threatens to hamper the company's recent efforts to win back investors' trust. Earlier this month, the 56-year-old executive urged investors to look past concerns that have sent the stock of the Laval, Quebec-based company down more than 50 percent from its August peak and said they should focus on products that will grow beyond expectations.
General Counsel Robert Chai-Onn, Executive Vice President Ari Kellen and Chief Financial Officer Robert Rosiello will form an office of the CEO while Pearson is out, and Valeant board members Robert Ingram, Mason Morfit and Howard Schiller will oversee the office.
“The committee will be working closely with the entire management team to ensure that the company continues to operate normally while Mike focuses on his health,” Ingram said in the statement. “Out of respect, we will be honoring his family's request for privacy and will not be commenting further on his condition at this time.”
Pneumonia is an infection of the lungs caused by bacteria, a virus or fungus, with symptoms including cough, fever and difficulty breathing. With treatment, most patients improve within 1 to 3 weeks, according to the American Lung Association. About 53,000 people in the U.S. died of it in 2013, said the Centers for Disease Control and Prevention.
Pearson has promised shareholders to provide more transparent data about Valeant's business, including sales figures for its top 30 drugs. The company's strategy has drawn scrutiny from lawmakers and investors for its use of mail-order pharmacies, price increases and acquisitions for growth.
"If the company continues on the path that it's on, they need Mike Pearson," said Dimitry Khmelnitsky, an analyst with Veritas Investment Research Corp. in Toronto who covers the company. "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."
Rosiello and Ingram are qualified to lead the company, Khmelnitsky said in an interview before Pearson's medical leave of absence was announced.
“Senior management ranks have been relatively unstable at Valeant so there is a very short list of possible successors to Pearson,” Irina Koffler, an analyst at Mizuho Securities USA, wrote in a note to clients Monday before Pearson's leave of absence was announced.
Valeant came under scrutiny in October about its relationship with mail-order pharmacy Philidor Rx Services. Former Philidor employees have alleged that the pharmacy altered some doctors' orders to specify that they wanted brand-name drugs instead of generics, a way to get larger reimbursements for Valeant from health insurers. Philidor said that it only filled prescriptions with medications that doctors and patients requested. Valeant has cut ties with Philidor.
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