Valeant board, Ackman back CEO Pearson as shares continue downward dive

J. Michael Pearson

Valeant's ($VRX) stock price may have hit its lowest point in more than two years, but the company's board and enthusiast investor Bill Ackman still say CEO J. Michael Pearson is the one for the job.

On Thursday, the company's shares plummeted by 14%, hitting their lowest level since May 2013. And on Friday, Valeant offered up a possible explanation: Goldman Sachs sold nearly 1.3 million shares it was holding as collateral as part of $100 million in loans it had extended to Pearson.

Among other things, Pearson used those loans for financing charitable contributions--including one to Duke University, his alma mater--and helping fund a community swimming pool, Valeant said.

Valeant's shares were already suffering plenty before the Goldman sale. First, vows from politicians and lawmakers to crack down on drug-price increases brought Valeant--which employs price hikes as part of its strategy--into the spotlight. And more recently, short seller Citron Research accused the drugmaker of using its relationships with specialty pharmacies to inflate its top line.

Now, they're down 70% from their peak in August, Bloomberg notes--and they're past the point where they should be, according to Mizuho Securities analyst Irina Koffler, who figures they're worth about 25% more than Thursday's closing price of $78.77.

"The stock keeps going down as if the company doesn't contain very viable business segments," she told the news service. "People forget that there are very real businesses and assets and platforms within this company."

Meanwhile, despite all the racket, the company's board maintains that Pearson has its "full confidence."

"Mike remains focused on running the business and has been meeting with physicians, partners, and other stakeholders," company spokeswoman Laurie Little told Bloomberg by email. "Despite recent market volatility that has impacted our stock price, Valeant's core business remains strong and is well positioned for growth."

Bill Ackman

And Ackman--Valeant's third largest shareholder and its former takeover partner in 2014's failed pursuit of Allergan ($AGN)--pledged his support to Pearson on Thursday, too.

"We share the board's confidence in you and your leadership," he wrote in an email to Pearson. While he has "strong views on Valeant's communication strategy" and "would have taken a different approach" to addressing the Citron allegations, "you and the board should not interpret this as a negative reflection on my view of you as the CEO of the company."

Those comments follow a Wall Street Journal interview published on Wednesday, in which Ackman said he'd pressed Valeant to "come clean" and disclose everything the company knew about specialty pharmacy Philidor, the main player implicated in Citron's allegations.

As Ackman told the WSJ he said to lead Valeant director Bob Ingram, "if Mike hides in the bunker on this, he can't be CEO."

- see Valeant's release
- get more from Bloomberg here and here
- read Ackman's letter
- see the Wall Street Journal story

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