Shares of Valeant Pharmaceuticals (VRX) popped in early trading after the company announced that activist investor John Paulson, one of its biggest shareholders, will join the board of directors.

PAULSON JOINS BOARD: Valeant reported this morning that billionaire hedge fund manager John Paulson, of Paulson & Co, was elected to its board of directors, effective June 14. Paulson & Co. is one of Valeant's largest investors, with a 5.6% stake in the drug maker as of March 31. Valeant CEO Joseph Papa commented that "We are pleased to welcome John to Valeant's board of directors. With his significant business and financial expertise, John will be a strong addition to the board. His experience will be especially valuable as we continue to execute on our transformational strategy to turnaround Valeant." Paulson commented that the strategic plan to transform Valeant "smartly focuses on rebuilding the company's core franchises in ophthalmology, dermatology and gastroenterology while simultaneously using the proceeds from the sale of non-core assets and operating cash flow to de-lever the company." He added he is "fully supportive of the strategy and leadership team at Valeant." Paulson's addition increases the size of Valeant's board to 11 members, 10 of whom are independent.

WHAT'S NOTABLE: Valeant has been a target of activist investors including Pershing Square's Bill Ackman, who resigned from Valeant's board and sold his stake in the company amid increasing investment losses earlier this year. After calling the Valeant investment a "huge mistake" in March, Ackman stated in a May interview with Bloomberg that he will "probably stay away from pharmaceutical companies" after the large losses he incurred investing in Valeant. Meanwhile, Valeant CEO Joseph Papa, who joined the company in May 2016, is working to taper the company's focus to its dermatology, gastrointestinal and eye care businesses by selling other assets to repay its debt. Papa said in January that Valeant will pay down $5B of its debt over the next year and a half through a combination of non-core asset sales and the operation results of the company.

PRICE ACTION: Valeant is up nearly 5% in early trading to $13.28, though shares are down about 9% year-to-date.