Valeant has said it will restate its results for 2014 and 2015 after determining that about $58 million in sales to specialty pharmacy company Philidor were incorrectly recognized when drugs were delivered to Philidor rather than when they were dispensed to patients.
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Valeant said in a statement it has kicked off a search for a new CEO, with Pearson continuing as both chief executive and director until his replacement is appointed.
On March 16, 2016, Valeant Pharmaceuticals (VRX) was trading at a forward PE (price-to-earnings) multiple of 2.94x. Schiller is the company’s former chief financial officer, and he served as interim CEO during Pearson’s medical leave.
The company’s former CFO and former corporate controller’s “improper conduct” contributed to the misstatement of financial results, Valeant said in a statement.
“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”, Pearson said.
It is facing allegations of gouging customers on drug prices, accusations it has denied.
Valeant’s prescription drug sales began to unravel a year ago as its history of large price increases drew sharp criticism and the attention of lawmakers as well as NY and MA attorneys general, which opened investigations.
The company said it plans to file its annual report for 2015 on or before April 29. “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’s board requested that Schiller tender his resignation as a director, but Schiller hasn’t done so. The accounting decision was not my decision, but I was advised of the decision and the rationale behind the decision by the Corporate Controller, and I agreed with the decision.
In a statement, Ackman pitched Valeant’s potential. “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. Pearson will remain in charge until a successor is found.
Additionally, activist investor and CEO of Pershing Square Bill Ackman will join the Valeant board, adding to Pershing Square’s representation. Ackman’s firm has a 9% stake in Valeant, and he will joint Stephen Fraidin, Pershing Square’s vice chairman, on the board.
Industry analysts say Pearson’s departure is a positive step, although they are alarmed by new accounting issues raised by the internal review.
Valeant Pharmaceuticals International Inc. also said Ackman is joining its board immediately.
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She said the company is at serious risk and needs to sell assets to severely cut its US$30 billion debt. The New York Times also published an article detailing Valeant’s fall in stock shares. Even with Monday’s gain, the stock price is still only a fraction of the all-time high price of $263.81 that it reached last August.
