Valeant Pharmaceuticals, whose stock has fallen 73 percent this year amid U.S. investigations of its business and accounting practices, announced Monday that CEO Mike Pearson is leaving. The board ousted Pearson after a series of weekend phone calls, a decision that "was not mutual" according to a person familiar with the situation.
The same source tells CNBC, Valeant's board informed Pearson of the action it was taking — to immediately initiate a search for the next CEO, and that he was no longer in the company's long-term plans.
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In a Monday statement, the board also announced that activist investor Bill Ackman is joining the board. Former CFO Howard Schiller refused to leave the board to make room for Ackman.
Shares of Valeant closed up 7 percent on Monday. Over 9 million shares were traded in the first 10 minutes of trading.
Valeant said that Pearson will stay on as CEO until his successor is found.
Former Medtronic CEO Bill George told CNBC's "Closing Bell" that he doesn't think Pearson should be the interim CEO and that the board should tap Bob Ingram, formerly of GlaxoSmithKline, instead.
"They have to take the lid off of this company and really get under the covers and find out what's going on. Until Pearson is out of there, they can't do that," George said.
George, who is also a CNBC contributor, also said that Valeant's business model is unsustainable and that it should sell off some of its acquired businesses to deal with its debt situation. Ultimately, some transparency is also needed, he noted.
"We don't have any information about what's going on at this company. We just get bits and pieces," he said. "Honestly, the activist hedge funds like Bill Ackman and Value Act have been remarkably patient, maybe too patient here."
Last week, the stock closed down more than 51 percent in one day when the company slashed its 2016 revenue forecast and said that a delay in filing its annual report could pose a debt default risk.
"While we regret the circumstances that have resulted in the delay of our 10-K filing, we are committed to filing the 10-K on or before April 29, 2016," Pearson said in a statement Monday.
The Canadian drugmaker came under fire when The New York Times reported that Valeant and other pharmaceutical companies were using a network of specialty pharmacies to sustain sales of their high-priced drugs and prevent patients and insurers from switching to cheaper generic drugs. Citron Research subsequently published a note calling Valeant the "pharmaceutical Enron."
In response, Valeant formed an ad hoc committee to review the allegations regarding specialty pharmacy Philidor RX Services. The U.S. Securities and Exchange Commission is investigating the relationship between the two companies.
"It's been a privilege to lead Valeant for the past eight years. While I regret the controversies that have adversely impacted our business over the past several months, I know that Valeant is a strong and resilient company, and I am committed to doing everything I can to ensure a smooth transition to new leadership," Pearson said in the statement.
Valeant initially requested Schiller to step down from the board, but Schiller "has not done so," according to the company's statement.
"As a result of the fact that I did not engage in any improper conduct regarding this proposed restatement, I have respectfully declined the request from the Company's Board to resign from the Board," Schiller said in a statement.
"We are aware of Mr. Schiller's views, and the company stands by its statement in the company's press release and 8-K," said Laurie Little, Valeant's senior vice president of investor relations.
Katharine Stevenson volunteered to resign instead to create the vacancy for Ackman.
"I am looking forward to working with the board to identify new leadership for Valeant," Ackman said in a statement. "On behalf of all shareholders, we are extremely appreciative of Valeant employees' hard work and commitment during this challenging time for the company."
Ackman's firm owns a 9 percent stake in Valeant.
Last week, Ackman sent an email to investors promising to take a more proactive role at Valeant. In his email he reiterated that Pershing continues to "believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price."
A spokesman for Pershing Square did not provide comments to CNBC regarding the Valeant news.
— Reuters and CNBC's Meg Tirrell contributed to this report.