Valeant is calling in a hedge fund executive at its most testing time

Valeant Pharmaceuticals has added an activist hedge fund executive to its board after its stock tanked following a short-seller's research report.

The Canadian drug company's share price has gone on a wild ride over the last week, following allegations by Citron Research.

The company hosted an all-hands call on Monday morning to address the allegations.

It also announced Monday that G. Mason Morfit, the president of ValueAct Capital, is rejoining Valeant's board, effective immediately.

Morfit previously served on the board from May 2007 to May 2014. He was also chairman of Valeant's board.

Morfit served on the board when Valeant recruited J. Michael Pearson from McKinsey to come on as its CEO.

"I am pleased to welcome Mason back to the Valeant Board of Directors," Pearson said in a statement.

"Although Mason has not officially been a part of the Valeant Board for more than a year, I have continued to value his vision and guidance, and I believe his insights will be invaluable during this time."

Another ValueAct partner, Robert Hale, is also on the Canadian pharmaceutical company's board. Hale replaced the seat of ValueAct CEO Jeffrey Ubben in late August. Ubben had served on the board as its chairman.

A long-time winner for ValueAct

Over the years, Valeant Pharmaceuticals had been a huge winner for ValueAct.

ValueAct, which is more long-term than your typical activist, first purchased shares in Valeant in 2006 in a price range of about $11, according to The Wall Street Journal.

ValueAct is currently the second-largest hedge fund shareholder of Valeant. It last held 14.9 million shares, or a 4.4% stake, according to the lastest available data. Valeant remains ValueAct's largest stock position.

During the second quarter, the fund sold about 4.49 million shares. TheWall Street Journal reported that much of that stake (4.2 million shares) was sold in a range of $219 and $230.60 per share. That works out to be an estimated profit of at least $913 million, according to our calculations.

In the last week though, Valeant's shares have collapsed more than 36% after California-based Citron Research published a report that asked if Valeant was operating as an Enron-like fraud.

Valeant's share price was last down 1.95% at about $113.90.

Here's a five-day chart: