March 19, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Two executives of embattled Salix Pharmaceuticals, Ltd. walk away from the company with a combined $46 million despite major accounting and inventory problems prior to its sale to Valeant Pharmaceuticals International, Inc. , it was announced yesterday.
On Jan. 28, 2015, Raleigh, N.C.-based Salix Pharmaceuticals (SLXP) announced that it was revising its 2013 financial statement and the first three quarters of 2014 because of inaccuracies. Overall, the adjustments showed a decreased profit per share of 18 cents in 2013, but increased profits per share of a penny for the first three quarters of 2014.
The company was very close to an acquisition agreement with Allergan Inc. in November 2014 when Salix’s inventory problems were uncovered during due diligence. Shortly afterward the deal fell apart and Salix’s chief financial officer, Adam Derbyshire, resigned.
In January Salix also announced that its chief executive, Carolyn Logan, was planning to retire, effective Jan. 30, 2015.
On March 16, 2015, Valeant announced that it would acquire Salix for $173 per share in cash, beating out rival Endo International plc . Valeant teamed up with Bill Ackman, founder of Pershing Square Capital Management. Valeant and Ackman made an unsuccessful hostile takeover bid for Allergan Inc. (AGN) in 2014. The deal is priced at around $11.2 billion.
“We continue to be very excited about the combination of our two companies,” said J. Michael Pearson, Valeant’s chairman and chief executive officer in a statement,“and we are committed to getting this deal done.”
Despite the problems with Salix’s inventory and financial reporting, Derbyshire will receive $10.2 million in stock and $3.1 million in options he was given before the accounting problems were discovered. Logan will take away $32.7 million in stock she was awarded prior to the sale to Valeant.
Both Logan and Derbyshire signed off on the inaccurate financial statements. In addition, outside auditors Ernst & Young also approved the 2013 annual report.
“It’s not just about the accounting scandal, it’s about the value they’ve created in Salix,” said Shibani Malhotra, an analyst with Sterne Agee & Leach Inc. in a statement. From 2008 to the current period, stock grew from $8 per share to more than $170 per share. “Things didn’t end well, but it doesn’t take away from what they did do.”
Salix commercializes products for gastrointestinal disorders. Its most successful drugs are Xifaxan for traveler’s diarrhea and Uceris for ulcerative colitis. Xifaxan is also expected to get approval by the U.S. Food and Drug Administration (FDA) for irritable bowel syndrome.
BioSpace Temperature Poll
After Amgen Inc. said last week that it will close its South San Francisco facility acquired during its $10 billion buyout of Onyx Pharmaceuticals and will lay off 300 of Oynx’s 750 workers, BioSpace is wondering—will the number of mergers and acquisitions completed in 2014 mean a “streamlining” of biotech jobs in the Bay Area? Tell us your thoughts.
