Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Valeant has a delicate balance to strike with the health of CEO Mike Pearson, who remains in the hospital being treated for severe pneumonia, an illness first disclosed on Christmas Day. It must reassure investors awaiting his return, but have effective leadership in his absence.

The ex-McKinsey consultant is fundamental to the company. He's the architect, for better or worse, of the company’s wildly successful, widely emulated, and now widely scorned strategy of buying drugmakers, raising drug prices and slashing R&D costs. 

Good Marks for Valeant's Interim CEO
Investors approved of the choice of Howard Schiller to fill in for the hospitalized Mike Pearson.
Source: Bloomberg
Intraday times are displayed in ET.

After several days of being run by committee, Valeant on Wednesday announced, to the palpable relief of investors, that respected ex-CFO Howard Schiller and lead independent director Bob Ingram will be interim CEO and chairman of the board, respectively. Valeant still expects Pearson will return, according to its press release, but the timing is uncertain and his medical leave indefinite.

Schiller, who helped build Valeant, is a solid pick as interim CEO. He's a good communicator and has an impressive Wall Street pedigree. But as good as he has been in the past as Valeant's "explainer in chief," this is a very different company than the one he left last summer.

Wednesday's announcement drove a 3 percent stock-price bounce and represents a significantly better plan than management by committee. But it is no panacea for the array of financial and image problems the company faces, and Pearson will still be sorely missed by his believers.

The latter is made clear by the 10 percent dive the company's shares took on the news of his illness. He's largely the reason for Bill Ackman's huge stake in Valeant; the Pershing Square head's over-the-top April 2014 presentation on the company compared Pearson to high financial priests Warren Buffett and John Malone. 

In December -- after Valeant's stock price had been cut in half by accusations it had used a closely affiliated specialty pharmacy called Philidor to artificially inflate its sales -- Pearson helped stop the bleeding with a confident presentation to investors outlining a recovery plan. Valeant shares rose more than 20 percent in the days after the presentation, despite the company slashing its revenue guidance for 2015.

Not According to Plan
The announcement of Mike Pearson's illness helped derail the beginnings of a comeback.
Source: Bloomberg

Pearson argued that the company's issues could be overcome and that he expected 21 percent revenue growth in 2016, even without acquisitions. Should everything go right, the company could get back to its acquisitive ways in 2017, he said.

But much could still go wrong: The results of the company's investigation into its Philidor relationship haven't been released. A whole lot of debt needs to be paid off. And Valeant still has congressional hearings on its pricing practices and pharmacy relationships ahead. Its turnaround plan has little margin for error -- a highly touted Walgreens partnership at the core of the plan is due to be fully operational on January 15.

There's nothing wrong with a steady hand on the tiller, but Valeant is more likely to spend the year whitewater rafting.    

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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