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As Valeant Pharmaceuticals grapples with intensifying scrutiny of its business practices, the drug maker has added three new members to its board, including one from Pershing Square Capital Management, one of its largest shareholders.

The move comes in a bid to reassure investors. In recent months, Congress held hearings about Valeant’s strategy of buying medicines and then jacking up the prices to previously unseen heights. The company has become a prominent poster child for the national debate over the high cost of medicines.

But Wall Street was also unnerved last week when Valeant unexpectedly withdrew financial guidance and disclosed that it is being investigated by the US Securities and Exchange Commission. The one-two punch was delivered as Michael Pearson, the chief executive, returned after a two-month medical leave.


The new board members include Fred Eshelman, who once headed another drug maker and a clinical research organization; Stephen Fradin, an attorney who is also vice chairman at Pershing Square; and Thomas Ross, a former president of the University of North Carolina and a former judge.

Valeant stock rose this morning, although to what extent this reflected investor reaction to the new appointments is unclear. Bill Ackman, who heads Pershing Square and has previously expressed confidence in Pearson, predicted that either new management will soon be brought in or the drug maker will be sold if the situation doesn’t stabilize soon, according to Reuters. Ackman made the remarks Tuesday at an investor conference.


In any event, one analyst had reservations about the new board members.

In a note to investors, Wells Fargo analyst David Maris wrote that solidifying ties with large investors that already have board seats is unlikely to add any expertise needed for navigating the myriad problems that Valeant faces. ValueAct Capital, for instance, has two seats on the board, which is growing to 14 seats. One existing board member, Anders Lonner, is leaving for personal reasons.

Maris expressed another concern over Fradin’s appointment, given the controversy over ties between Pershing and Valeant when the companies teamed up two years ago to make a failed takeover bid for Allergan. Before the bid, Pershing quietly bought a 10 percent stake in Allergan, which jumped in value after Valeant announced its offer. The companies face a lawsuit alleging insider trading.

As for Eshelman, Maris noted that Pershing Square had previously pushed for him to join the Allergan board, suggesting that investors will likely come to view him as another Pershing Square candidate. As a result, the Valeant board would be stocked with directors employed or supported by large investors.

The Wells Fargo analyst also pointed out that Ross is currently a Distinguished Fellow at Duke University and that Pearson has contributed $45 million — $15 million in 2011 and $30 million in 2014 — to the school. The university named the School of Nursing building after Pearson’s wife, Christine. “We believe investors will have reservations about the Duke University connection,” Maris wrote.