Alexion Pharmaceuticals announced that previously issued financial results do not need to be restated following the completion of an internal investigation relating to certain sales practices for Soliris (eculizumab). However, the probe concluded that there was a "material weakness" in the company's controls over financial reporting, which was due to senior management "not setting an appropriate tone."
In November, Alexion disclosed that it was conducting an investigation into Soliris sales practices following allegations made by a former employee, leading the company to delay filing its quarterly financial results. Soliris, which generated sales of about $2.6 billion in 2015, was initially approved in the US in 2007 for the treatment of paroxysmal nocturnal haemoglobinuria, later gaining clearance for use in patients with atypical haemolytic uremic syndrome.
According to the drugmaker, the investigation found that certain revenue "pulled in" from the first quarter of 2016 into the fourth quarter of 2015 was realised by employee actions that involved "inappropriate business conduct." Alexion explained that "pull-in" sales of Soliris increase revenue recognised in an earlier fiscal quarter than the one in which a sale otherwise would have occurred, and when conducted in accordance with the company's rules are "not inherently problematic or impermissible."
Alexion indicated that the estimated total "pull-in" sales for the fourth quarter of 2015 represented less than 1 percent of total revenue for the whole year. The company added that the probe did not identify any instances of improper revenue recognition associated with "pull-in" sales, all Soliris orders were valid and placed by customers for patients in order to fulfil an actual need, and there were no instances where Soliris was sold to build stock of unwanted product.
Commenting on the matter, interim CEO David Brennan said "we have already initiated remedial actions to maintain a strong internal control environment and are committed to setting a tone at the top that is fully aligned with our ethical standards and values." Brennan, who serves on Alexion's board, was appointed as stand-in chief executive last month after the resignation of CEO David Hallal for personal reasons. At the same time, chief financial officer Vikas Sinha left the drugmaker.
Alexion indicated that it has now filed its financial results for the third quarter of 2016, and expects to report full-year results, along with its financial outlook, on February 16. For related analysis, see ViewPoints: Uncertainty rules at Alexion.
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