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How much is one month of advice from Michael Pearson worth? Valeant Pharmaceuticals is willing to pay more than $83,000.

Valeant stock may have tanked and its growth strategy imploded during his final months running the beleaguered drug maker, but Pearson was just awarded a consulting contract that will pay him more than $583,000 through the end of this year and as much as $180,000 next year, or $15,000 a month, according to a filing with the US Securities and Exchange Commission. The fees will be pro-rated for partial months.

The consulting services were listed in a letter that outlines his separation agreement, which was dated May 26, more than three weeks after his tenure as Valeant chief executive ended. He has since been replaced by former Perrigo Chief Executive Joe Papa.


Besides the consulting work, Pearson is also scheduled to receive a $9 million severance payment within 60 days of his May 2 departure. Although he did not receive a salary last year and his bonus was reduced to $2 million, Pearson is being paid a $2 million annual salary for 2016, which means he can expect to receive about $700,000, according to a recently filed proxy statement (see page 49).

Pearson also holds long-term deferred-stock awards that were valued at $140 million when they were granted. However, these only convert to Valeant shares if the stock achieves big gains by 2019 and 2020 over the base price of more than $140 a share when they were awarded. Recently, Valeant stock has been trading slightly above $28 a share.


To what extent the consulting fees may ignite protest is unclear. For now, the consulting contract pays less than $1 million, which is unlikely to grab the attention of most investors for more than a moment. But much like the $10.8 million in retention bonuses to be handed out to three executives by the end of this year, the funds were generated by a tactic that hinged on buying drugs and then jacking up prices by sky-high amounts.

That approach made Valeant a Wall Street favorite thanks to the loans used to buy companies and medicines, and the resulting fast-paced revenue that fueled a rising stock price. Pearson famously espoused a view that R&D was an expensive and, therefore, unnecessary pursuit, a philosophy that suggested he was at the forefront of a new business model for much of the pharmaceutical industry.

But his pronouncements later amounted to hubris as the maneuvering came crashing down last year amid consumer outrage and congressional scrutiny. There were also questions about accounting practices and clandestine dealings with a mail-order pharmacy. Papa has now inherited a company facing multiple federal and state investigations into pricing and accounting, among other issues.

While some patients and, more recently, investors have not benefited, Pearson is faring better, although his compensation package has been criticized.

“His whole arrangement was pretty significantly flawed from the beginning,” said Mark Reilly, managing director of The Overture Group, a compensation consulting firm. “It’s heavily weighted toward an aggressive stock-based plan. You could make an argument that it encouraged too much risk-taking.”

Last week, Valeant released a new plan for executive compensation in an effort to blunt such criticism.

“As for the consulting, it’s common to see that as a goodbye for a CEO,” Reilly continued. “Is he actually going to do any consulting? Those are questions the board should ask before putting it in place. But the change in his salary for this year is almost a retroactive salary increase. Given that they did that, I’m not really sure they had to do the consulting.”

After the consulting deal expires in December 2017, the arrangement can be extended in one-month increments. In addition to the consulting fees, Valeant has also agreed to provide Pearson health, medical, and dental benefits, and an office in its Madison, N.J., building for up to two years.

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