Accounting & Tax

Cold-Sore-Drug Maker Gets Wells Notice

Revenue recognition and related disclosures in 2003 are among the issues under scrutiny, according to the company.
Stephen TaubMay 14, 2007

Biovail, a Canadian specialty drug company that makes a cream for treating herpes cold sores, disclosed that it has received a Wells notice from the Securities and Exchange Commission regarding a previously disclosed investigation of accounting and disclosure practices for fiscal 2003 and certain transactions associated with an acquisition in 2002.

According to Biovail, the issues under scrutiny include whether the company improperly recognized revenue and expenses in certain periods, whether it made improper disclosures related to those statements, and whether it provided misleading disclosures regarding Biovail’s forecast of a revenue shortfall for the quarter ending September 30, 2003.

Under SEC procedures, a Wells notice indicates that the staff has made a preliminary decision to recommend that the commission bring a civil action; recipients have the opportunity to respond to the SEC staff before a formal recommendation is finalized.

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Biovail stressed that it continues to cooperate with the SEC.

Last week, Biovail restated its 2005 and 2006 earnings upward due a data error regarding discounted purchases of Zovirax, a drug used to treat herpes. The company reported that it uncovered the data error while closing its financial statement for the first quarter of 2007.

The revisions boosted earnings for those years by $10.2 million and $7.7 million, respectively.

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