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 "As the timing of (Pearson's) expected return is uncertain, he will
be on a medical leave of absence until further notice," Valeant said
in a statement.
Investors appeared to like the board's decision to have Schiller,
Pearson's long-time lieutenant, run the company for now.
During most of the years Pearson led the Laval, Quebec-based
company, Schiller worked alongside him. The two employed a rapid
growth strategy based on a constant stream of acquisitions and drug
price increases.
One large investor who knows Schiller said he has top financial
credentials coupled with a more personable manner than Pearson,
something that could play well with regulators, lawmakers and
investors as the embattled company seeks to repair its tattered
image.
Last year Valeant's surging growth stalled amid questions about its
pricing and accounting practices, sending its share price tumbling
73 percent from its $263 record in August.
"Schiller's return shows that Valeant has no intention of changing
the borrow, buy, and boost prices strategy he helped devise," said
Erik Gordon, a professor at the University of Michigan's Ross School
of Business.
Schiller left as CFO last year, saying he wanted to "do some things
on my own," but he remained on the board. He was part of an investor
conference call last fall after Valeant disclosed its tight
relationship with Philidor Rx Services. The pharmacy had used
aggressive tactics to boost sales of Valeant dermatology products
before the drugmaker cut ties.
Valeant is also under investigation by government prosecutors in New
York and Massachusetts and is the target of a congressional inquiry.
The large investor said Schiller is the ideal choice to take the
reins now because he knows its dealmaking intimately and is not the
public face of its troubles.
"Sometimes not having the guy who was in the thick of the problems
at the helm to lift the company up again is a good thing," the
investor said.
Wall Street analysts said Schiller could help keep Valeant on track
in the near term.
Bill Ackman, one of Valeant's largest and most vocal shareholders,
with an 8.5 percent stake at his Pershing Square Capital Management
fund, expressed his support for Schiller in a statement to CNBC.
Other large shareholders include hedge funds ValueAct Capital
Management and Paulson & Co.
Schiller was Valeant's CFO from December 2011 to June 2015 and has
been on the board since 2012. He previously worked in investment
banking at Goldman Sachs for 24 years, experience that helped
support a run of acquisitions, including Salix Pharmaceuticals.
The board agreed on Schiller during a call on Tuesday, after at
least one large investor had urged it to abandon a quickly pulled
together three-person executive committee, a person familiar with
the matter said.
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A different source familiar with the situation said that the board
had talked to many investors about interim replacements as it became
clear that Pearson would not return immediately.
Robert Ingram, a former chief executive of drug maker
GlaxoSmithKline and a Valeant director since December 2010, will be
chairman, the company said. This splits the roles of CEO and
chairman for now, which investors often prefer.
General Counsel Robert Chai-Onn, Executive Vice President Ari Kellen
and Chief Financial Officer Robert Rosiello took over for 56-year
old Pearson when he was hospitalized. The company has not provided
further information about his medical history or illness.
One Wall Street analyst said that shareholders are still awaiting
Pearson's return. "Investors like Schiller and think he is capable
of executing on Valeant’s strategy, but they still prefer Mike
Pearson overall and hope that he comes back," said Evercore ISI
analyst Umer Raffat.
Investors, many of whom are hoping for a recovery in the shares back
to at least $200, are worried that Pearson will not return or that
his illness could be used as an opportunity to push him out, Raffat
said.
Dr. Debra Spicehandler, an infectious disease specialist at Northern
Westchester Hospital in Mount Kisco, New York, said it would be
unusual for a patient to remain in the hospital more than five or
six days for simple pneumonia alone.
Patients staying much longer could need treatment for bloodstream or
hospital-acquired infections and have to remain on ventilators to
assist their breathing. Spicehandler, who is not treating Pearson,
said they might also have experienced serious consequences of
pneumonia, such as a heart attack or heart failure.
Valeant shares ended trading on Wednesday up 1.5 percent at $102.40
on the New York Stock Exchange, after rising as much as 5 percent
earlier in the day, while most other pharmaceutical companies'
stocks fell.
(Reporting by Caroline Humer and Carl O'Donnell in New York and Svea
Herbst in Boston; Additional reporting by Ransdell Pierson in New
York and Amrutha Penumudi in Bengaluru; Editing by Kirti Pandey,
Lisa Von Ahn and Steve Orlofsky)
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