UPDATED 10:45 a.m. EDT — Valeant Chief Financial Officer Howard Schiller released a statement rebutting the company's claims that he had been responsible for "improper conduct" in past financial disclosures. "At no time did I engage in any improper conduct that relates to any restatement of revenue the company is considering," Schiller said in the statement, reiterating his refusal to accept a request by the board of directors to resign.
Valeant Pharmaceuticals International Inc. (NYSE:VRX) announced Monday that CEO J. Michael Pearson will be stepping down following a series of corporate missteps that have contributed to the company's stock dropping nearly 75 percent this year.
The troubled drugmaker simultaneously announced that activist investor Bill Ackman will join the board of directors. Ackman, whose hedge fund, Pershing Square Capital Management, owns a 9 percent stake in Valeant, has taken an increasingly interventionist role in the company as its executives have attempted to weather a storm of scrutiny.
In addition to the C-suite shakeup, Valeant admitted to "improper conduct" by key financial officers at the company, brought on by the pressure to hit ambitious revenue goals. "The tone at the top of the organization and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company's improper revenue recognition," the statement read.
Valeant placed a corporate controller on administrative leave and announced that executive compensation would be affected by the "deficient control environment" responsible for the financial upheaval. The company placed blame for earnings misstatements on Chief Financial Officer Howard Schiller, who refused the board's request to step down.
— John Carney (@carney) March 21, 2016
The accounting missteps stem from the specialty pharmacy Philidor RX, a private distributor that had been instrumental to the drugmaker's sales of drugs like Jublia, a foot cream priced at $500 a bottle. Allegations of questionable sales practices at the shadowy pharmacy exploded last year, eventually prompting Valeant to shutter Philidor and empower a committee to investigate reported financial incongruities surrounding the arrangement.
But the flap over Philidor may not be the only source of uncertainty. "There remains a possibility that additional accounting adjustments may be identified," the company said, admitting that internal controls may have been ineffective as late as the end of December.
Last week Valeant issued an early look at revised financials for 2016 that showed sharply diminished profitability and unclear projections for growth. The drugmaker, which has delayed posting fourth-quarter 2015 earnings, promised to report by April 29.
Pearson, who had only recently returned from a two-month sick leave, sounded a hopeful note on his departure. "While I regret the controversies that have adversely impacted our business over the past several months, I know that Valeant is a strong and resilient company, and I am committed to doing everything I can to ensure a smooth transition to new leadership," he said.
Several analysts downgraded Valeant following the news. Barclays analysts cited "unknowns around profitability" in a note flagging "greater uncertainties" at the drugmaker. UBS suspended coverage of Valeant "due to the lack of visibility in financials."
Valeant shares were rising in early trading following news of the corporate shakeup.