A Medical Device Daily
Biovail (Toronto) a developer of pharmaceutical products using advanced drug-delivery technologies, reported that it has reached a settlement with the SEC in respect of an investigation of the company and certain current and former officers.
The company has entered into a consent decree with the SEC in which the company has not admitted to the civil charges contained in the complaint but has agreed to pay $10 million to fully settle the matter. As part of the settlement, the company has also agreed to an examination of its accounting and related functions by an independent consultant.
The investigation is related to previously disclosed accounting and financial disclosure practices that occurred between 2001 and 2003 (Medical Device Daily, May 15, 2007) and resulted in a civil complaint filed by the SEC yesterday.
The settlement does not include four individuals who were also named in the complaint, including two of the company's former officers, Eugene Melnyk (then chairman/CEO) and Brian Crombie (CFO), and two of its current officers, Kenneth Howling (then responsible for corporate communications, and current CFO) and John Miszuk (VP, controller and assistant corporate secretary). The allegations against these individuals have not been resolved.
Howling and Miszuk are being reassigned to different non-officer positions within the company.
Adrian de Saldanha, Biovail's VP of finance and treasurer, has been appointed interim CFO.
With respect to the previously disclosed investigation by the Ontario Securities Commission (OSC), the company today confirmed that the OSC has issued a notice of hearing against it and the four individuals referred to above in respect of substantially the same matters as are described in the SEC complaint.
The SEC's complaint alleges that in October 2003, Biovail and some of its executives schemed to deceive investors and analysts by falsely attributing nearly half of Biovail's failure to meet its third quarter 2003 earnings guidance to a truck accident involving a shipment of one of Biovail's products. Led by Melnyk, Biovail intentionally misstated both the effect of the accident on Biovail's third quarter earnings as well as the value of the product involved in the truck accident. The accident, in fact, had no effect on third quarter earnings.