Five members of the board of directors of troubled Canadian drugmaker Valeant Pharmaceuticals Intl. are expected to step down Friday and a new CEO will replace J. Michael Pearson at the helm of the company in May, as it struggles to cope with the a range of issues, including investigations into pricing of its drugs, as well as regulatory and accounting matters.
Valeant announced Monday that Joseph C. Papa will join the company early May as its new chairman and CEO, and that Pearson will continue in his current role and as a director till Papa joins.
“Papa, 60, has more than 35 years of experience in the pharmaceutical, healthcare services and specialty pharmaceutical industries, including 20 years of branded prescription drug experience,” according to the company’s statement.
Before joining Valeant, Papa was chairman and CEO of Perrigo Company, a Michigan manufacturer of over-the-counter medication.
Other than Pearson, four other directors are expected to step down from Valeant’s board Friday, the Wall Street Journal first reported Wednesday. The change was indicated during Valeant’s Senate Committee hearing Wednesday, where company director William Ackman told the committee: “A lot of the board is going to turn over.”
Names of the outgoing directors have not been announced, but the Journal quoted unidentified sources to say that Mason Morfit, president of ValueAct Capital — a major Valeant shareholder — who has been on the board since last fall, would be stepping down.
Norma Provencio and Theo Melas-Kyriazi, both of whom were on the board’s audit and transactions committees, have also expressed their intent to depart. Ronald Farmer, a Canadian investor, is also said to be weighing his resignation.
Chairman Robert Ingram, who led internal investigations that uncovered an accounting error earlier this month, is also reportedly considering resigning. On the other hand, former CFO Howard Schiller, who has been accused of misconduct related to an accounting error and was present at the Senate hearing, has refused to resign and won’t be nominated for reappointment to the board, the Journal reported.
In an SEC filing Wednesday, Valeant revealed the pay package for incoming CEO Papa. He will receive a base salary of $1.5 million and up to another $2.25 million in bonus, which will depend on meeting certain financial and strategic metrics. He will receive substantial equity in the company.
Outgoing CEO Pearson will receive an annual base salary of $2 million, and a bonus opportunity of up to 200 percent of the base salary, three-fourths of which is linked to certain corporate performance metrics.
Valeant has yet to file its Form K-10 for fiscal year ended Dec. 31, 2015, and in another SEC filing, it announced its intent to file it by Friday, April 29, failing which it could default on some of its $30 billion debt.
The company’s shares closed 0.8 percent higher on the New York Stock Exchange Thursday, at $35.22 a share, a loss of more than 83 percent in 12 months and a far cry from its peak of over $262 a share in August 2015.