Valeant Pharmaceuticals International Inc. Chief ExecutiveOfficer Mike Pearson will step down ina board and management shakeup after a series of controversies thatculminated in a 61 percent drop in the shares last week.

The drugmaker has started a search to replace Pearson, who willstay CEO until a successor is found, according to a statementMonday. Bill Ackman, the billionaire investor whose Pershing SquareCapital Management LP is one of the drugmaker’s biggest investors,will join the board. Valeant said it asked former Chief FinancialOfficer Howard Schiller, who took over for Pearson during atwo-month medical leave, to resign from the board following“improper conduct.” Schiller, in a statement via his law firm, saidhe never engaged in any improper conduct and refused to step downas director.

The latest developments cap three chaotic weeks since Pearson’sreturn from his leave, raising even more questions about Valeant’saccounting practices. Since the end of February, Valeant hasdelayed filing of its annual report pending an internalinvestigation by an ad hoc committee, disclosed an Securities and Exchange Commission probe andsaid it would restate several quarters worth of results. Thecompany, which has been under scrutiny for months for its business practices, saidMonday it has discovered “one or more material weaknesses” ininternal controls.

“The improper conduct of the company’s former chief financialofficer and former corporate controller, which resulted in theprovision of incorrect information to the committee and thecompany’s auditors, contributed to the misstatement of results,”Valeant said in the statement.

The shares had their biggest intraday gain since Dec. 15, andwere up 12 percent to $30.10 at 10:06 a.m. in New York. Last week,the stock had fallen by more than half after the drugmaker cut its2016 forecast, reported weak fourth-quarter results and said it wasat risk of breaching some of its debt agreements.

Valeant’s $3.25 billion of 6.125 percent bonds rose 2.4 cents to77.75 cents on the dollar at 9:40 a.m. in New York, according toTrace, the bond-price reporting system of the Financial IndustryRegulatory Authority.

“This is a positive first step,” said Jack Flaherty, amoney manager in New York at GAM Holdings AG., which oversees $127billion, including Valeant debt. “They have a long way to go.” WhenValeant releases its earnings reports, “that will be a realpositive,” he said.

Ackman on board

Ackman’s addition to the board will give Pershing Square twodirector spots, after Pershing Vice Chairman Stephen Fraidin joinedearlier this month. To make room for Ackman, director KatharineStevenson voluntarily resigned, the company said.

Ackman, who has said he would become more active at the company,is getting on the board after a nightmarish week, during which hisPershing Square Holdings hedge fund suffered hundreds of millionsof dollars in paper losses.

The board is close to completing the ad hoc investigation ofbusiness practices, Valeant also said Monday. The probe was startedlast year after the drugmaker revealed its relationship with amail-order pharmacy that critics said was used to inflatesales.

“While the ad hoc Committee is still reviewing certainaccounting-related items, and has identified certain concernsrelated to those items with respect to the tone of theorganization, it has not identified any additional items affectingthe financial statements to date,” Valeant Chairman Robert Ingramsaid in the statement.

Valeant said its former corporate controller, whom it didn’tidentified, has been placed on administrative leave.

In his statement Monday, Schiller said transactions with themail-order pharmacy, Philidor Rx Services, in the fourth-quarter of2014, and subsequent accounting treatment, was the result of “acareful and reasoned accounting decision made by the company’scorporate controller based on what she considered to be completeand accurate facts.”

“The accounting decision was not my decision, but I was advisedof the decision and the rationale behind the decision by theCorporate Controller, and I agreed with the decision,” Schillersaid.

Fall from grace

Pearson, 56, built the drugmaker into what was once a WallStreet darling with a series of debt-funded acquisitions and alow-cost research and development model. That strategy drewcriticism from Congress when Valeant bought up existing drugs,including treatments for serious heart conditions, and then raisedtheir prices aggressively.

Pearson later said Valeant would refrain from such priceincreases, yet that hasn’t been enough to soothe investors’ nerves.In a one-day rout, Valeant plunged 51 percent on March 15 inreaction to Pearson’s first conference call with investors after hereturned to his job from a two-month leave of absence forpneumonia.

Among the surprises that day: a $600 million typo in thecompany’s preliminary fourth-quarter earnings release, overstatingits forecast for the next four quarters of adjusted profit beforeinterest, tax, depreciation and amortization. Pearson acknowledgedthe mistake and said he had to earn back credibility and deliver onresults.

“While I regret the controversies that have adversely impactedour business over the past several months, I know that Valeant is astrong and resilient company, and I am committed to doingeverything I can to ensure a smooth transition to new leadership,”Pearson said in the statement.

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