J. Michael Pearson (born 1959) is a Canadian American pharmaceutical company executive. He is the former chairman and CEO of Valeant Pharmaceuticals International after being ousted in the aftermath of a report on pharmaceutical pricing published by Citron Research in April 2016.
On April 27, 2016, Pearson, Bill Ackman and Howard Schiller appeared before the United States Senate Special Committee on Aging to answer concerns over the repercussions for patients and the health care system whom are affected by Valeant's business model.
In 2017, Pearson sued Valeant Pharmaceuticals for $31 million as compensation for his alleged wrongful termination as CEO and chairman. In December 2017, a New Jersey judge ruled that Pearson should pursue his claim by arbitration rather than through the courts.
Early life and education
Pearson was born in London, Ontario, Canada. His father worked for Bell Canada and "helped design the phone lines in some of the small towns" and also worked at global consulting firm McKinsey & Company. Pearson moved to New Jersey with his family when he was 12 years old.
In 1981, he graduated summa cum laude from Duke University, where he earned his BS and BSE; he was also a member of Phi Beta Kappa. He then earned an MBA from the University of Virginia Darden Graduate School of Business Administration.
Career
Pearson joined McKinsey & Company in 1985 and worked as a consultant there for 23 years before rising to the position of director.
Valeant Pharmaceuticals International
See Valeant Pharmaceuticals
Before taking over as the CEO of Valeant Pharmaceuticals in 2008, Pearson worked for them as an outside consultant in 2007. In 2008, Pearson began implementing his strategy by selling off portions of Valeant's European business to Meda AB. In 2010, Valeant and the Canadian-headquartered company Biovail agreed to merge; the resulting company was named Valeant and its headquarters are in Mississauga, Ontario. Pearson was named CEO of the new company and in March 2011 was appointed chairman of the board. The Biovail merger allowed the company to reduce its tax rate to approximately 5% by situating its headquarters in Canada. Later, Valeant would be called upon to testify before Congress, along with Burger King, about how its tax inversion potentially gave it a competitive advantage over American companies. A New York Times article credits Pearson's "tough tactics" for the financial success of the "fast-growing" Valeant. The article also highlights the criticism that Valeant Pharmaceuticals' controversial strategy attracted patients who are finding themselves unable to afford drugs after price hikes by Valeant. This pricing controversy was originally raised when Senator Bernie Sanders and Representative Elijah Cummings sent a letter to Valeant seeking justification for huge price increases it put on two life-saving drugs: Nitropress and Isuprel. The company had raised the price of Isuprel by almost six times and the price of Nitropress by over three times. Shortly after, Democratic members of Congress attempted to subpoena Valeant for this information. As CEO, Pearson's business strategy was to eliminate "risky and inefficient" Research and Development to the equivalent of "only 3 percent of its sales" whereas "traditional big drug companies spend 15 to 20 percent of sales on research and development". Instead, he acquired dozens of companies with existing drugs and saved money by laying off their employees. This model worked and Valeant's stock price rose by over 1000%. By 2013, under Pearson's tenure, Valeant became the largest pharmaceutical company in Canada. By 2015 Pearson had "nearly $US 3 billion in stock and options" in Valeant, with "the potential to own hundreds of millions of dollars more." Since Pearson became CEO, Valeant shares "have returned more than 2,300 per cent" making Valeant the "most valuable" performer on the Toronto Stock Exchange. By July 2015, Valeant's market capitalization was $CDN 113 billion, which is about $4 billion more than the Royal Bank of Canada. However, by October of that same year, negative press surrounding its pricing tactics and a particularly negative analyst report from Citron Research dropped Valeant's stock to approximately $CDN 78 billion.
In a conference call with Valeant investors on October 19, Pearson announced changes in Valeant's business strategy: they were to spend "more on research and development and less on acquisitions of smaller drug makers" and that there would be "minimal price increases on its products" in 2016.