(Reuters) - Valeant Pharmaceuticals International Inc on Wednesday named board member and former Chief Financial Officer Howard Schiller as interim chief executive officer to replace Michael Pearson, who has been in the hospital with severe pneumonia since late December.

"As the timing of (Pearson's) expected return is uncertain, he will be on a medical leave of absence until further notice," Valeant said in a statement.

During most of the years Pearson led the Laval, Quebec-based company, Schiller worked alongside him. The two employed a rapid growth strategy based on a constant stream of acquisitions and drug price increases. Last year that formula began to stall, as the high pricing came under scrutiny.

"Schiller's return shows that Valeant has no intention of changing the borrow, buy, and boost prices strategy he helped devise," said Erik Gordon, a professor at the Ross School of Business at the University of Michigan.

Valeant's growth faltered again after its shares dropped with the disclosure of a tight relationship with Philidor Rx Services. The pharmacy used aggressive tactics to boost sales of Valeant dermatology drugs before Valeant cut ties.

Valeant is also under investigation by government prosecutors in New York and Massachusetts.

The move to replace Pearson with Schiller for an indefinite period pushed Valeant shares down initially, but they later recovered to trade nearly 2 percent higher at $102.64 in New York.

Wall Street analysts said the move could help keep Valeant on track in the near-term.

"Schiller has had a long working relationship with Pearson and has been integral to the company’s evolution over the past five years," JP Morgan analyst Chris Schott said in a research note.

Bill Ackman, one of Valeant's largest shareholders with an 8.5 percent stake at his Pershing Square Capital Management fund, told CNBC in a statement that he thought Schiller would do an "outstanding" job and also cited his experience working alongside Pearson.

Schiller was Valeant's CFO from December 2011 to June 2015 and has been on the board since 2012. He previously worked in investment banking at Goldman Sachs for 24 years.

Robert Ingram, a Valeant director since December 2010, will be chairman, the company said.

(Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Kirti Pandey and Lisa Von Ahn)