Pearson ready to return from leave, but board isn't sure

J. Michael Pearson

Valeant Pharmaceuticals CEO Michael Pearson says he's ready to get back to work after a two-month medical leave, CNBC reports. But the company's board is debating whether they agree.

According to the cable news network, as cited by Reuters, Pearson's health is improving after a serious bout with pneumonia that sent him into the hospital for weeks. Former CFO Howard Schiller has been serving as interim CEO in his absence.

Valeant has been under fire for months, both for allegations of questionable business practices and for some huge price hikes that angered the public and politicians. The company's once-high-flying stock has cratered--with new declines this past week on a negative analyst report from Wells Fargo and news that Valeant would restate its earnings.

Meanwhile, Schiller was called to testify about pricing on Capitol Hill, and the company's board has been investigating allegations of misreported financials and a too-cozy relationship with a specialty pharmacy. The earnings restatement stems from that probe, Valeant said earlier this week, and the investigation itself could extend into May, analysts said.

With Pearson's medical leave extending day by day, some investors have questioned whether he'd return at all. And in his much-publicized investor note last Friday, Wells Fargo analyst David Maris questioned whether Valeant could make the changes necessary to get back on track without changes in the executive suite and on its board.

Valeant's board hasn't suggested that Pearson might not return from leave, and Pearson said last month that he was looking forward to coming back. Schiller, however, has said he'd stick around as CEO if the company asked him to.

Since Schiller stepped in, he's promised some changes, including abandoning Valeant's longtime use of price increases to boost revenue. "[W]e're listening and we're changing," he said during his congressional committee testimony early this month, saying that the company would raise drug prices in the future "within industry norms, and much less than" it did for Isuprel and Nitropress, two CV meds it bought and repriced several times higher than before. Schiller has also echoed Pearson's own promise last year to step back from the serial M&A Valeant has used to grow by leaps and bounds over the past several years.

Valeant has made some key changes since last summer, after the first allegations of shady dealings at Philidor, a specialty pharmacy the company used to distribute a range of its drugs. The company said it would cut ties with Philidor and inked a deal with Walgreens ($WBA) to take over some distribution and offer some Valeant products at big discounts.

And on the good-news side of the ledger, Valeant investors appeared relieved that the earnings changes weren't all that large. The very fact of correcting past numbers is "incrementally negative," BMO analyst Alex Arfaei wrote this week, but the $58 million in revenue that needs shifting amounts to less than 1% of Valeant's overall sales--"hardly enough to support the channel stuffing claims that have been raised against the company," he wrote in a research note.

"We have made mistakes in the past," Schiller acknowledged when the earnings changes were announced Monday. "Our focus today is on executing our business plan and rebuilding trust."

- see the Reuters story
- get more from The Wall Street Journal (sub. req.)

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