Valeant heeds calls for new CEO

Valeant ($VRX) CEO J. Michael Pearson is on his way out--and this time, it's for good.

The Canadian drugmaker has started searching for a new skipper to replace Pearson as it struggles under the threat of debt default, a still-brewing scandal and governmental scrutiny. Pearson will remain at the helm until the company names his successor, Valeant said in a Monday statement.

The change is no surprise, considering the disastrous few weeks since Pearson returned from a medical leave of absence. Last week, he acknowledged that, a) a delay on the company's' regulatory filings--thanks to accounting missteps related to Philidor, the subject of last fall's channel-stuffing allegations--put Valeant at risk of defaulting on its debt, and b) several of the company's businesses were seriously underperforming. Investors didn't much like the news, sending shares crashing down by more than 50%.

And Pearson was already on a short leash: The company reportedly compiled a short list of replacements, including former Sanofi ($SNY) CEO Chris Viehbacher and former Schering-Plough chief Fred Hassan while he was out with pneumonia, and the board almost didn't let him retake his old post.

The CEO search wasn't the only bomb Valeant dropped Monday, though. In the same statement, it attributed those Philidor-related accounting blunders to "improper conduct" from former CFO Howard Schiller and the company's corporate comptroller, which "resulted in the provision of incorrect information." The company has asked Schiller, still a Valeant director, to resign, but so far he hasn't.

And according to the ad hoc committee assembled to investigate the channel-stuffing claims, the "tone at the top of the organization and the performance-based environment"--which valued achieving challenging targets as a key performance metric--"may have been contributing factors resulting in the company's improper revenue recognition."

All that fog surrounding Valeant's accounting procedures could make the CEO job a tough sell. And if that wasn't enough to scare off potential candidates, the company is still dealing with a plethora of other problems. It's currently under multiple investigations--including ones from the Securities and Exchange Commission and Congress. Payers have frozen out some of its key products. Debtors are reportedly preparing to wrangle tougher new agreements now that the company has its back against the wall--and the list goes on.

But one thing about the search for a successor is clear: Bill Ackman, head of No. 2 Valeant shareholder Pershing Square Capital Management and onetime Pearson enthusiast, will be on hand to help spearhead it. After vowing action amid the share-price freefall last week, Ackman Monday took a seat alongside Pershing Square's vice chairman Steve Fraidin at Valeant's boardroom table, with director Katharine Stevenson voluntarily stepping down to make space for him.

"I am looking forward to working with the board to identify new leadership for Valeant," Ackman said in a statement. "The company's large scale and dominant franchises in eye care, dermatology, GI and other therapeutic areas, coupled with its extraordinarily low valuation, present a spectacular opportunity for a world-class healthcare executive."

- read the release (PDF)