Valeant Pharmaceuticals said that it will likely restate earnings for 2014 and 2015 as a result of a review into the company's relationship with the specialty pharmacy Philidor. Interim CEO Howard Schiller called the decision "very disappointing but necessary," adding "we remain committed to improving reporting procedures, internal controls and transparency for our investors."
In October last year, Valeant created a committee to review allegations related to its relationship with Philidor. A report from online investment newsletter Citron Research had previously claimed that Valeant was using pharmacies related to Philidor, which the company had an option to purchase, to store inventory and record the transactions as sales in an effort to artificially inflate revenue. Valeant subsequently severed ties with Philidor.
According to Valeant, it currently believes that approximately $58 million of net revenues previously recorded in the second half of 2014 should not have been recognised upon delivery of product to Philidor. The drugmaker added that correcting the misstatements is expected to reduce reported 2014 earnings per share by approximately $0.10 and increase 2015 earnings per share by approximately $0.09.
Valeant explained that the review "identified certain sales to Philidor during 2014...that should have been recognised when product was dispensed to patients rather than on delivery to Philidor." The company noted that this occurred prior to it entering into an option to acquire Philidor. Valeant added that following entry into the option to acquire Philidor in December 2014, the drugmaker began to consolidate Philidor's accounts and began to recognise sales to the specialty pharmacy firm only when dispensed to patients.
Last December, Valeant lowered its sales and earnings guidance for 2015, in addition to its profit forecast for 2016, due to fallout associated with the allegations concerning its prior relationship with Philidor.
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