Valeant Pharmaceuticals International Inc on Monday said a group of company executives will immediately take over for its chief executive officer until he returns from medical leave, sending shares tumbling 10 percent.
The Canadian company said CEO Michael Pearson, 56, was being treated for severe pneumonia.
Valeant and Pearson have come under pressure for steep price increases on some of its drugs and for close ties to a specialty pharmacy that used aggressive methods to overcome insurer barriers to reimbursing its medicines.
Pearson was hospitalized with the lung condition on Friday. A company spokeswoman declined on Monday to say whether he had experienced any complications or when he might return, adding it was honoring a family request for privacy.
"It is an inopportune time for their leader to take sick leave after the company has faced credibility issues in recent months," said Morningstar analyst Damien Conover. "If the company was on solid footing, it wouldn't be as much of an issue."
Valeant said its board has created an "office of the Chief Executive Officer," which will include General Counsel Robert Chai-Onn, Group Chairman Ari Kellen, and Chief Financial Officer Robert Rosiello.
"It is a little unusual to have that sort of operating structure, a panel" to fill in for an absent drug company CEO, Conover said.
The board also created a committee to oversee and support the office of the CEO, including lead independent director Robert Ingram, president of ValueAct Capital Mason Morfit, and former Valeant CFO Howard Schiller.
Pearson, who joined Valeant as CEO in 2010 after a 23-year career at consultancy McKinsey & Co, has made rapid-fire acquisitions that greatly increased its size and share price. But its stock has plunged this year due to questions about Valeant's marketing practices and the sustainability of its business model.
Investors have been turning up pressure on the Laval, Quebec-based company to provide a more detailed plan on how it will boost profits in 2016.
Under a deal announced this month, Walgreens Boots Alliance will take over many of the functions previously handled by Philidor Rx Services. Valeant cut ties with the specialty pharmacy in response to allegations of aggressive billing practices.
Valeant shares were down $11.25 to $102.81 in late-morning trading on the New York Stock Exchange.
(Reporting by Ransdell Pierson in New York and Natalie Grover in Bengaluru; Editing by Shounak Dasgupta and Jeffrey Benkoe)