Salix Pharmaceuticals, Ltd. Overstated Revenue and Income by Millions: Audit

January 29, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Raleigh, N.C.-based Salix Pharmaceuticals, Ltd. announced yesterday that it would revise its financial statement for 2013 and the first three quarters of 2014 because of inaccuracies.

The company will report less revenue by about $20.7 million and less net income by approximately $11.9 million. Overall, the adjustments will decrease profit per share by 18 cents in 2013, but increase profit per share by a penny for the first nine months of 2014.

The company has been battered by missteps and internal problems. Salix was very close to an acquisition agreement with Allergan Inc. in November 2014, when reports of Salix’s inventory problems cropped up during due diligence. This was followed quickly by Adam Derybyshire, Salix’s chief financial officer, resigning.

At the time, the company’s inventory issues caused the company share prices to drop more than 49 percent day-over-day. The stock hit a low on Nov. 7, 2014 of $91.47. Today’s news, however, doesn’t seem to be affecting share prices. Stock is currently selling at $133.50 per share.

On Jan. 21, 2015, Salix announced it had hired investment bank Centerview Partners Holdings to help the company determine its options for a potential sale. The company also announced that its chief executive, Carolyn Logan, was planning to retire effective Jan. 30, 2015. She will be replaced by Tom D’Alonzo, chairman of Salix’s Board of Directors.

The errors in Salix’s statements are mostly related to the timing for recognition of certain revenue, expense items and revenue-reducing returns. The company indicates these changes are not expected to effect 2015 and 2016 Guidance. It also plans to file its Annual Report for fiscal year 2014 prior to March 2, 2015, as scheduled.

“The conclusion of the accounting portion of the ongoing Audit Committee review is an important milestone,” said D’Alonzo in a statement. “While in total the restatements are minor in scale, the Audit Committee takes these matters very seriously and is in the process of promptly enhancing controls and procedures to ensure this never happens again.”

Salix develops and markets drugs and medical devices for the treatment of gastrointestinal diseases. Products include Apriso, Pepcid, and Xifaxan. Apriso is used for the treatment of ulcerative colitis, proctitis, and proctosigmoiditis. Pepcid is used to treat heartburn. Xifaxan is an antibiotic used to treat traveler’s diarrhea.

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