SEC Charges Salix Pharmaceuticals and Former CFO With Lying About Distribution Channel

The Securities and Exchange Commission today charged Salix Pharmaceuticals Ltd. and its former CFO with repeatedly misleading analysts and investors about the company’s future prospects. The former CFO, Adam Derbyshire, will pay more than $1 million to settle the charges. According to the SEC’s complaints, Salix and Derbyshire lied to analysts and investors during quarterly earnings calls by significantly understating the amount of Salix drugs that wholesaler customers held in inventory. Salix had engaged in a long-standing practice of flooding the distribution channel by using incentives to induce customers to purchase more products, creating a short-term revenue bump but excess supply that imperiled future sales. The complaints allege that Salix and Derbyshire also failed to disclose in SEC reports that the practice had impacted earnings and presented a significant risk to Salix investors.