Valeant to Make Sweeping Changes to Board
April 27 2016 - 9:50PM
Dow Jones News
Valeant Pharmaceuticals International Inc. is planning sweeping
changes to its board of directors as it moves to set a new tone at
the top of a company under fire from politicians and investors for
its management and drug-pricing practices.
The drugmaker is expected to announce as early as Friday that
five of its long-standing directors have agreed to step down to
make room for new nominees, according to people familiar with the
matter. Four new directors are lined up to join the board, the
people said. Their names couldn't be learned, but they draw heavily
from traditional pharmaceutical companies, the people said—a sign
that Valeant is looking for credibility from an industry it has
long criticized as bloated, slow-moving and wasteful.
Incoming Chief Executive Joseph Papa, a drug-industry veteran,
will also join the board and will take on the role of chairman. He
is expected to start work Monday.
William Ackman, a Valeant director and major shareholder,
signaled the pending change during his testimony at a Senate
Committee hearing during which he, outgoing CEO Michael Pearson and
director Howard Schiller faced tough questioning over Valeant's
widespread drug price increases.
"A lot of the board is going to turn over," Mr. Ackman told the
committee. He also promised swift changes to the expensive price
tags on many Valeant drugs.
The board reshuffling follows the addition of four new
directors, including Mr. Ackman, earlier this year.
One departing director is Mason Morfit, president of major
Valeant shareholder ValueAct Capital who returned the board last
fall, the people said. ValueAct has been an investor in Valeant
since 2006 and helped recruit Mr. Pearson, then a health-care
consultant at McKinsey & Co., to the CEO job in 2008.
Directors Norma Provencio and Theo Melas-Kyriazi have also told
the company that they plan to step down, the people said. Both have
been Valeant directors since Mr. Pearson was named CEO, and they
sat on the board's audit committee and transactions committee.
Other directors are weighing resignations and the board has
asked for their decision by Thursday, one of the people said. They
include Ronald Farmer, an Ontario-based investor, and Chairman
Robert Ingram, a former senior official with GlaxoSmithKline. Mr.
Ingram led a special board committee through an internal
investigation that wrapped up earlier this month after uncovering
an accounting error related to sales to a mail-order pharmacy that
pushed Valeant drugs.
Mr. Schiller, Valeant's former chief financial officer, won't be
nominated for reappointment to the board, people familiar with the
matter said. Mr. Schiller refused to resign from the board after it
alleged last month that he engaged in "improper conduct" related to
the accounting error. Mr. Schiller has denied wrongdoing.
And Mr. Pearson will also leave the board to make room for Mr.
Papa. Mr. Papa, who ran generic-drug maker Perrigo for a decade,
takes the reins of a Valeant board where few directors held their
seats a year ago.
On Wednesday, Valeant disclosed the details of Mr. Papa's pay
package, which is tied heavily to whether the company's beaten-down
stock price can recover. In addition to a $1.5 million salary, Mr.
Papa will receive about 1.3 million restricted shares, most of
which vest over the next few years if Valeant's stock clears
certain thresholds. He would receive little until the stock roughly
doubles its current levels. If it hits $270 a share—just above the
high-water mark reached last summer—Mr. Papa would receive stock
worth more than $500 million.
(END) Dow Jones Newswires
April 27, 2016 21:35 ET (01:35 GMT)
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