Valeant Pharmaceuticals International Inc. is withdrawing its financial forecast and will delay releasing fourth-quarter results, as Chief Executive Officer Michael Pearson returns to the drugmaker grappling with questions about its business practices, strategy and accounting.
Pearson, who has been on a two-month medical leave, will give up his title as chairman of the company. Robert Ingram, a board member, will fill that role, Valeant said in a statement Sunday. Interim CEO Howard Schiller, a board member and the company’s former chief financial officer, will step down but remain on the board.
The drugmaker, whose stock has lost more than two-thirds of its value since August, had been scheduled to give an overview of its fourth-quarter results on Monday, though was delaying making a formal regulatory filing. It will wait to file its annual report until an internal investigation by the board -- which is partly focused on Valeant’s relationship with mail-order pharmacy Philidor Rx Services LLC -- is completed. The board committee is also looking at Valeant’s accounting.
“Our hope is that the Ad Hoc Committee will be able to conclude its efforts soon with regards to financial reporting and internal control matters, so we can all focus on building the best company we can,” Ingram said in the statement.
Valeant had said in December that it expected sales of $2.7 billion to $2.8 billion in the fourth quarter, and adjusted earnings of $2.55 to $2.65 a share. For 2016, it forecast sales of $12.5 billion to $12.7 billion and adjusted earnings of $13.25 to $13.75 a share.
Pearson, who was hospitalized in late December with severe pneumonia, went on sick leave as he was attempting to regain investors’ trust after the company came under fire for its price increases and a relationship with Philidor. “Some unexpected complications resulted in a longer hospital stay than anticipated,” Pearson, 56, wrote in a memo to employees on Jan. 25.
"His coming back is very good, to the extent the ad hoc committee found something, he wouldn’t have been allowed back,” said Umer Raffat, an analyst with Evercore ISI. “The question is why didn’t they lower the guidance, why did they just withdraw it?” who has a buy rating on the stock.
Ingram said Sunday that the illness had made it clear it was important to plan for a successor to the CEO.
“Given the size and breadth of our company, succession planning and building out our senior team to provide additional resources and support for Mike are high priorities for the board,” he said in the statement.
The CEO built Valeant into a Wall Street darling through serial acquisitions and a lean research and development model before the drugmaker became a poster company for aggressive price hikes.
“I realize that recent events are disappointing to everyone and it is my responsibility to set the appropriate tone for the organization,” Pearson said in Sunday’s statement. “My immediate priority will be to build stronger relationships with important constituents, such as managed care and other channel partners, regulators and government representatives, while improving Valeant’s reporting procedures, internal controls and transparency.”
Pearson took over Valeant in 2008, bringing with him a business model honed over 23 years as a consultant at McKinsey & Co. that centered on an unconventional approach eschewing research and development in favor of acquisitions. He also had great ambitions: In January 2014, he said he wanted Valeant to be a top 5 pharmaceutical company by 2016.
Deals and Debt
He made more than 50 acquisitions totaling $34 billion -- including Bausch & Lomb Inc., Medicis Pharmaceutical Corp. and Salix Pharmaceuticals Ltd. -- and accumulated more than $30 billion in debt. Pearson bought older treatments already on the market, often substantially raising their prices.
Paying down debt remains a priority for the company, Pearson said Sunday.
The price hikes drew criticism from lawmakers, health insurers and pharmacy benefit managers. So did reports on its relationship with Philidor, which specialized in helping doctors and patients get access to Valeant drugs even when insurers declined to cover them. Valeant said on Oct. 30 that it would cut ties with Philidor. On Dec. 15, the drugmaker announced an agreement to sell skin and eye medications through Walgreens Boots Alliance Inc. at a lower price.
With Pearson on medical leave, interim CEO Schiller represented the drugmaker at a congressional hearing in early February and promised to end an era of sharp hikes. Schiller joined Valeant in 2011 as chief financial officer, and announced his desire to depart in April 2015. He remained a director and consultant after stepping down from his finance post.
Source : bloomberg.com