Valeant Pharmaceuticals stock fell as much as 9% Tuesday after the troubled drug maker disclosed it was under investigation by the U.S. Securities and Exchange Commission.
A Valeant spokeswoman said Monday that the company confirmed that it had “received a subpoena from the SEC in the fourth quarter of 2015 and, in the normal course, would have included this disclosure in its 2015 10-K.”
According to the Wall Street Journal, citing a person familiar with the matter, the SEC has requested information about Valeant’s now-terminated relationship with drug distributor Philidor Rx Services LLC. Valeant has submitted emails, financial documents, and other data to comply with the request.
During a hectic 24 hours — Valeant also canceled its 2016 financial guidance, delayed filing its fourth-quarter earnings report, and announced that CEO J. Michael Pearson was returning from medical leave — the company’s shares fell more than 18% Monday. The decline continued Tuesday before the stock climbed in afternoon trading to $64.94, a loss of 1.3%.
The WSJ also reported Monday that a finance executive, Tanya Carro, had left the company in the wake of an internal review that found Valeant had booked some revenues from Philidor too early in 2014, an error it disclosed last week.
An ad hoc committee formed by the company has found about $58 million of net revenues previously recognized in the second half of 2014 that should not have been recognized upon delivery of product to Philidor. Correcting the misstatement is expected to reduce reported 2014 GAAP EPS by approximately $0.10 and increase 2015 GAAP EPS by approximately $0.09, according to Valeant.
Valeant has lost almost three-quarters of its value since August amid scrutiny of its drug pricing practices (it had a policy of buying old drugs and then raising their prices), distribution system, and accounting. Former employees and others have said Philidor used aggressive tactics to get insurance companies to pay reimbursements for Valeant’s drugs.
Some analysts were especially concerned about the scrapped 2016 guidance, which Valeant had lowered in December to account for lost revenue from its move to terminate the Philidor relationship.
“Valeant’s withdrawing guidance should be an indication to investors just how uncertain and changing Valeant’s business is,” David Maris of Wells Fargo said in a research note, according to the WSJ.