Boss axed at controversy-hit Valeant Pharmaceuticals

Trading screen shows Valeant share price Image copyright Reuters

The boss of Valeant Pharmaceuticals is to step down, saying he "regrets the controversies" that have affected the drugs maker in recent months.

Michael Pearson, who will stay as chief executive until a replacement is found, said Valeant was still a "strong and resilient company".

However, Valeant's former finance chief has declined to resign as a director.

Shares in Valeant jumped 11% in early trading after heavy losses last week, driven by fears of a default.

Valeant chairman Robert Ingram said: "While the past few months have been difficult, Valeant has a collection of leading brands, valuable franchises and great people, and I am confident that the company will be able to rebuild its reputation and thrive under new leadership."

Activist investor Bill Ackman, who has a 9% stake in Valeant, has been appointed to the board.

Image copyright Reuters
Image caption Michael Pearson will step down as Valeant chief executive once the company finds a replacement

Investigations pending

Former chief financial officer Howard Schiller declined a request to step down from the board, meaning Katharine Stevenson voluntarily resigned instead to make space for Mr Ackman, the company said.

Valeant added that Mr Schiller had contributed to the "mis-statement" of company results in 2014 and early 2015.

However, Mr Schiller said: "As a result of the fact that I did not engage in any improper conduct regarding this proposed restatement [of results], I have respectfully declined the request from the company's board to resign from the board."

Who is Bill Ackman?

Image copyright Reuters
Image caption Bill Ackman, founder and chief executive of hedge fund Pershing Square Capital Management, is one of the biggest shareholders in Valeant

Bill Ackman, 48, the newest member of Valeant's board, is one of the world's most well-known activist hedge fund managers, and has been an outspoken supporter throughout the company's turmoil.

Mr Ackman's hedge fund Pershing Square owns 9% of Valeant shares, making it the company's second largest investor.

Last week, when the possibility that Valeant would default on its bonds was raised, Mr Ackman wasted no time reassuring Pershing Square investors that the drug company was still a good bet.

In a letter he wrote that it was "highly likely" that banks would grant Valeant a waiver for missing the deadline to file financial information. Without that waiver Valeant could have entered a default on its loans.

"[Mr Ackman] has put his credibility on the line and it could make or break him," Aswath Damodaran a professor of finance at New York University, told the BBC.

"The markets are going to decide [Valeant's] value- his words could initially stem the problem, but they don't mean as much now," said Mr Damodaran.

Mr Ackman's support for Valeant is not new. He teamed up with the drug maker in 2014 to make a bid for Botox-maker Allergan.

In a controversial move Mr Ackman bought shares in both companies in an attempt to arrange the tie-up. He agreed to pay Valeant 15% of any profit made if Allergan was bought by a third party- which it eventually was.

Allergan's board rejected several offers by Valeant and was eventually purchased by Actavis for $66bn (£46bn).

Mr Ackman is no stranger to public corporate disputes. He has spent $1bn betting against nutritional supplement brand Herbalife, and encouraged regulators to investigate its board.

Mr Ackman has not reserved his insults for the company. He verbally spared with activist investors Carl Icahn and Daniel Lobe over Herbalife.

During a televised interview on CNBC Mr Ackman said Mr Icahn was being dishonest with investors, while Mr Icahn accused Mr Ackman of being a "cry-baby in the schoolyard". The two had a public reconciliation in 2014.

Valeant shares more than halved last week after it lowered revenue forecasts and said that delays in filing its annual results could result in a notice of default.

The firm is also facing an investigation by the Securities and Exchange Commission into its relationship with pharmacy Philidor, and an investigation by the US Congress into its drug pricing.

Mr Schiller was acting chief executive for two months this year while Mr Pearson took a leave of absence due to severe pneumonia.

Valeant makes a range of drugs for skin, eye, stomach and neurological conditions.

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