Shares of Valeant Pharmaceuticals tumbled on Monday after the troubled drugmaker said CEO Michael Pearson had been stricken with pneumonia, forcing him to take an extended medical leave.
A team of executives including CFO Robert Rosiello will take over Pearson’s duties in the interim, but Bloomberg said his illness “threatens to hamper the company’s recent efforts to win back investors’ trust.”
Valeant stock was down more than 10%, at $102.30, in trading Monday. It has fallen more than 50% since its August peak amid scrutiny from lawmakers and investors over its use of mail-order pharmacies, price hikes and acquisitions for growth.
The company earlier this month slashed its fourth-quarter financial predictions and issued a profit outlook for 2016 that was short of Wall Street’s estimate.
According to a Valeant spokeswoman, Pearson, 56, was hospitalized on Friday with a “severe bout of pneumonia.” Rosiello, General Counsel Robert Chai-Onn, and Executive Vice President Ari Kellen and Chief Financial Officer Robert Rosiello will form an office of the CEO while Pearson is recovering.
The board has also created a committee to oversee the executive team, consisting of Valeant’s lead independent director, Robert Ingram, former finance chief Howard Schiller, and Mason Morfit, president of large shareholder ValueAct Capital.
“The committee will be working closely with the entire management team to ensure that the company continues to operate normally while Mike focuses on his health,” Ingram said.
Valeant has said it plans to rebuild lost business in 2016 through a new distribution agreement with Walgreen’s pharmacies. Its sales have been hurt by the termination of a distribution arrangement with mail-order pharmacy Philidor, which has been criticized for aggressive billing practices.
“If the company continues on the path that it’s on, they need Mike Pearson,” Veritas Investment Research Dimitry Khmelnitsky analyst told Bloomberg. “When you have a company that has aggressive business practices, you need somebody who is an outside-the-box thinker, who’s willing to take substantial risks.”
Since taking over as Valeant CEO in 2008, Pearson has led its turnaround from a troubled small drug company to one of the industry’s highest-flying stocks. Rosiello was appointed CFO in June.