Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) slumped 8.88% to $103.98 on Monday morning after the company announced its chief executive officer, J. Michael Pearson, will be on an absence due to severe pneumonia.
Valeant also announced that its board created an office of the chief executive to temporarily manage the company. This office includes General Counsel Robert Chai-Onn, Chief Financial Officer Robert Rosiello and the company group Chairman Ari Kellen.
"Our thoughts are with Mike and his family," said Robert Ingram. "Out of respect, we will be honoring his family's request for privacy and will not be commenting further on his condition at this time. In the meantime, the Board of Directors has full confidence in Rob, Ari and Rob to preserve continuity of the Valeant operations and protect the long-term strength of the company while Mike is out. 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. I am confident that with the vast industry and business knowledge from the management team and the Board of Directors, we will manage through this period."
Mr. Pearson is a former consultant from McKinsey & Co. and was the architect behind Valeant’s improvement from a troubled small drug company. Since getting Valeant’s executive in 2008, Mr. Pearson used a lot of acquisitions to expand their business which resulted its stocks to skyrocket.
However, Mr. Pearson’s strategies also increased criticism, especially the drastic cuts he made to latest acquired companies. Mr. Pearson light investment in drug research and the major price increased on drugs. Critics have doubted the sustainability of Valeant’s strategies.
Recently Valeant has come much attention for its drug pricing strategy and the relationship with the mail-order pharmacy Philidor. Critics believe that Philidor built a "phantom pharmacies" network to steer pharmacy benefit managers toward Valeant's more-expensive drugs, rather than to cheaper alternatives. Valeant cut relationship with Philidor in October and announced later a distribution process the drugstore chain Walgreens for its dermatology and ophthalmology treatments.
Early this month, Valeant reduce its expectations for the fourth quarter and all of 2015 and issued a conservative outlook for 2016 mainly due to lower sales.