Valeant Adds 3 Directors, Including a Pershing Executiveby and
Investor Bill Ackman gets a board member at drugmaker
Other new members come from academia, pharmaceutical industry
Valeant Pharmaceuticals International Inc. will add three directors, including a representative from billionaire investor Bill Ackman’s investment firm, bolstering the board after facing criticism for its accounting and controversial distribution practices.
Ackman’s Pershing Square Capital Management LP, one of the drugmaker’s biggest shareholders, gained a board seat for Stephen Fraidin, its vice chairman. Also joining are Fred Eshelman, the former chief executive officer of Pharmaceutical Product Development Inc. and Thomas W. Ross, the former president of the University of North Carolina, Valeant said in a statement Wednesday.
Valeant expanded its board to 14 members following two volatile weeks marked by the return of CEO Michael Pearson from medical leave after a two-month absence, the withdrawal its financial guidance and delay of fourth-quarter results. The company, which had been under fire in recent months for its drug price hikes and the now-severed relationship with a controversial mail-order pharmacy, has also announced it’s being investigated by the U.S. Securities and Exchange Commission.
Valeant rose 3.7 percent to $65.44 at 11:33 a.m in New York. As of the market’s close Tuesday, the stock had lost three-quarters of its value since reaching an all-time high in August last year of $262.52.
Another director, Anders Lonner, has stepped down, Valeant said.
Adding Pershing Square’s Fraidin will put three representatives of major investors on the board. The drugmaker already has two directors from ValueAct Capital Management, which held a 4.4 percent stake as of Dec. 31, according to data compiled by Bloomberg.
Pershing Square owned 6.3 percent of Valeant as of last month. Ackman, speaking at a conference on Tuesday, raised the possibility that Valeant could sell one of its businesses to pay down debt, and said that if operations aren’t turned around, the management could be replaced or the company sold.
One of the new additions has been proposed by Pershing in the past: Eshelman, the veteran pharmaceutical executive, was on Pershing’s slate for Allergan Inc. in July 2014, when Ackman was working with Valeant on a hostile takeover of the Botox maker -- a deal they lost out to Actavis Plc.
The board changes didn’t impress David Maris, an analyst at Wells Fargo who has an underperform rating on the stock and has been a critic since initiating coverage last month.
“Adding a board member from a large investor, such as Pershing Square in this case, when ValueAct Capital already has two seats on the Valeant board seems redundant,” Maris wrote Wednesday in a note to clients, after the Wall Street Journal reported that new board members were under consideration.