Chief Michael Pearson leaves troubled drug-maker Valeant

Mr Pearson’s downfall has been as spectacular as that of Valeant, which has lost almost 90 per cent of its value since last summer

Michael Pearson will remain as interim chief executive until a replacement is appointed (Reuters)

Michael Pearson has stepped down as chief executive of Valeant Pharmaceuticals, following one of the most controversial and spectacular corporate implosions of recent years. The Toronto-based company was, until last August, the darling of the hedge-fund world, thanks to its aggressive borrow-and-buy strategy – which has unravelled in the space of a few short months.

Mr Pearson will remain as interim chief executive of the company he has led for the last eight years, until a replacement is found. Meanwhile, Bill Ackman, one of the most powerful Wall Street hedge-fund managers, whose Pershing Square fund has lost at least $2bn betting on Valeant in the past six months, will join the board. The company has yet to confirm whether Mr Pearson will take the $200m golden parachute his contract permits.

Mr Pearson’s downfall has been as spectacular as that of Valeant, which has lost almost 90 per cent of its value since last summer. A former management consultant, he took Valeant from relative obscurity to a permanent position in the headlines in the financial press – initially for its aggressive merger and acquisitions policy, founded on cheap debt.

However, by last autumn the headlines had taken a turn for the worse. The company was regarded as a major villain in the US pharmaceutical market, thanks to Mr Pearson’s policy of buying established drugs then marking the price up (sometimes by as much as 1,000 per cent overnight).

The policy enraged US consumers and managed to do what nobody else has done for a very long time – unite American politicians.

Valeant’s problems didn’t end there. Just as its pricing policy was beginning to gain wider (and unpleasant) attention, so its other business practices were being called into question. A California-based equity research company, Citron, drew attention to Valeant’s reliance on a shady sales partner, Philidor, resulting in a forced restatement of earnings.

Mr Pearson was in hospital at Christmas with pneumonia, but rather than things getting better in his absence, things appear to have got decidedly worse. Last week’s disastrous profit warning, which left the stock worth half what it had been at the start of the week, appears to have been the final straw for Mr Pearson. With lenders rumoured to be mulling a restructure of their payment terms, Valeant’s buy now, pay later strategy has come home to roost.