Valeant Pharmaceuticals International Inc (VRX.TO) named former Perrigo Co Plc (PRGO.N) head Joseph Papa as its chief executive officer on Monday to work on righting the company.

Controversy about Valeant's relationship with a specialty pharmacy and doubts over its acquisitive business model have slashed the drugmaker's market value. Valeant plans to restate 2014 and 2015 earnings and has not yet issued an audited 2015 financial report.

Activist investor Bill Ackman, who has lost billions of dollars on the company, recently joined its board, and creditors have increased pressure as well. Several groups of noteholders have issued notices of default, requiring Valeant to file the annual report. It has said it will do so by April 29.

“Well, it’s a hot seat,” said Cameron Hurst, chief portfolio manager at Canaccord Genuity Wealth Management, in an interview on BNN.  “He’s got a lot to do.  He’s got to get in there and very quickly try to get his arms around the problems.”

Papa will step into his new role in early May and replace current CEO Michael Pearson, who agreed in March to step down once a replacement was appointed. Papa, 60, will also be on Valeant's board.

He becomes Valeant's third CEO of the year, including Howard Schiller, the ex-CFO who led the company on an interim basis when Pearson went on medical leave.

Valeant shares rose 1.6 percent on Monday as the news of the high-profile hire eased some investor concerns about the company's ability to right itself. At Friday's close, the stock had fallen 86 percent from a high in August.

“You’re only going to take the job if you believe it’s a real company with real products and real cash flow,” said Patrick Kaser, portfolio manager at Brandywine Global, which owns more than 2.3 million Valeant shares. “It’s a vote of confidence by a presumably intelligent person.”

The news, first reported by Reuters, pushed shares of Perrigo down more than 15 percent. On Monday it replaced Papa with President John Hendrickson and also reported lower-than-expected preliminary earnings.

TURNING VALEANT AROUND

Laval, Quebec-based Valeant grew quickly as it embarked on an acquisition spree, snapping up other drugmakers and in many cases sharply raising prices of their products.

But the company lost favor with investors last year as its strategy came under scrutiny from regulators, the public and politicians. Pearson left in December suddenly on a medical leave for pneumonia and returned to Valeant at the end of February.

Papa joined Perrigo in 2006 and was previously president and chief operating officer of Watson Pharmaceuticals Inc.

Kaser said Papa brings experience selling over-the-counter healthcare products, which will be an asset for Valeant’s skincare and Bausch and Lomb eyecare lines.

Papa also has a background in integrating acquisitions and a reputation for operating ethically, Kaser said.

One early priority should be repairing Valeant’s relationship with health insurance companies, which are believed to be steering patients away from the company's products, Kaser said. “Job One is slowing and stemming the damage.”

Reuters reported earlier this month that Valeant had brought in investment banks to review its options amid interest from buyout firms and other companies in a number of its businesses. (Full Story)

Papa became well-known on Wall Street last year when Dublin-based Perrigo rebuffed a $26 billion takeover by Mylan NV (MYL.O), the largest-ever hostile bid decided by a shareholder vote.

He resigned on Sunday. Hendrickson, who has been with the generic drugmaker for 27 years and previously led several of its operations, including its U.S. consumer healthcare business, was named CEO effective immediately.

Perrigo also named director Laurie Brlas as chairman, separating that position from the CEO role.

The company reported preliminary first-quarter earnings of $1.71 to $1.77 per share and said it expected a full-year profit of $8.20 to $8.60 per share, excluding special items. Both are below analysts' expectations, according to Thomson Reuters I/B/E/S.