Investing

Valeant Needs to Fire CEO J. Michael Pearson

Douglas A. McIntyre

Published: February 23, 2016 6:45 am

Last Updated: January 13, 2020 12:51 pm

In light of a string of scandals that could ruin Valeant Pharmaceuticals International Inc. (NYSE: VRX), its board cannot afford to keep CEO J. Michael Pearson. In an upcoming feature from 24/7 Wall St.’s editors, we make the case that he is among the candidates for chief executive officers that should be fired.

Our analysis:

> Company: Valeant Pharmaceuticals
> CEO: J. Michael Pearson
> Years of Service: 5+
> Three-year comp: $23 million
>One-year share price: down 70%

It is time for the Valeant Pharmaceuticals International board to fire long-time CEO J. Michael Pearson. A Wells Fargo securities analyst recently made a comment that sums up what many on Wall Street think of the company: “We believe the Valeant board and management have made decisions that may have put Valeant at significant business and reputational risk.” This was followed by news media reports that Valeant will restate its earnings due to revenue recognition practices in its relationship with pharmacy company Philidor. Valeant Pharmaceuticals makes a number of major drugs for weight loss, vitamin deficiency, certain herpes viruses, major depressive disorder, hypertension and angina, and cardiovascular and neurological diseases. Its revenue has rocketed from $1.2 billion in 2010 to $8.3 billion last year after making many acquisitions. Pearson, who is on a medical leave of absence, was the engineer of most of the expansion. Valeant has become well-known for buying companies (Bausch & Lomb, Salix, Amarin) and buying rights to drugs and sometimes steadily raising the drug prices to much higher levels. At the time of his departure for medical leave, the company was already into deep trouble. Valeant has become a focus among pharma companies as part of the drug price debate that has grown as the 2016 U.S. presidential election gains steam. Valeant’s string of acquisitions also has left the company with a heavy debt load of over $30 billion. The controversy is around drug mail order company Philidor, which triggered the allegations of accounting fraud.

Valeant needs to bring in a new CEO, with the hopes that company can get the scandals behind it and emerge as a successful operation.