Report: SEC investigates former Salix CEO, CFO over investor disclosure
Feb 11, 2016 09:34 AM EST
The U.S. securities regulators are reportedly investigating the former top executives at Salix Pharmaceuticals. SEC probes Salix for its misled investors in connection with the company's 2014 disclosure that its drug inventory levels were much higher than previously reported.
According to Reuters, the U.S. Securities and Exchange Commission is probing Salix. It is focusing on what roles former Salix Chief Executive Officer Carolyn Logan and former Chief Financial Officer Adam Derbyshire may have portrayed in the disclosures, as the source claimed.
But it seems to be unclear whether the ongoing probe will ultimately lead to civil charges against the executives, said the source, who spoke anonymously because the matter is not public.
Valeant Pharmaceuticals International Inc. acquired Salix for about $11 billion last April. Valeant said that in an October financial filing Salix is facing an SEC investigation over disclosures and accounting issues related to the inventory amounts in its distribution channel.
WRAL Techwire claimed that the investigation centers on the inventory reporting, which led to the resignation of Chief Financial Officer Adam Derbyshire in late 2014 and the retirement of Chief Executive Officer Carolyn Logan in January of 2015. The source familiar with the probe revealed, "It remains to be seen if the ongoing probe will ultimately lead to civil charges against the executives, said the source, who spoke anonymously because the matter is not public."
In October, Valeant reported that Salix was facing an investigation by the SEC over the inventory and accounting issues. The insider claimed, "It had not been previously reported that the former CEO and CFO of Salix are major subjects of the SEC investigation."
And on the very same day Derbyshire resigned, the company reported it had "misstated wholesaler inventory drug levels," the Triangle Business Journal reported. Those disclosures lead to an audit that revealed an overstatement of revenue and income, which forced the company to restate its entire 2013 financial results. Additionally, all of the issues occurred while North Carolina-based Salix was being courted by multiple pharmaceutical companies, including Allergan(AGN).
For now, it seems that it is still unclear whether the ongoing probe will ultimately lead to civil charges against the executives, as said by the source, who spoke anonymously because the matter is not public. And since Valeant acquired Salix, this could also impact Valeant, which is already facing a series of state and federal investigations surrounding its drug pricing.