The US Securities and Exchange Commission (SEC) has 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 $1m to settle the charges.

According to the SEC’s complaint, 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.

The complaint alleges 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.

'The settlement with Salix reflects the company’s self-report to the Commission and its significant cooperation with the investigation,' said David Frohlich, assistant director in the SEC’s enforcement division. 'Salix’s proactive remediation included conducting an extensive internal investigation that led to Derbyshire’s resignation.'

The SEC says Derbyshire ‘agreed to a permanent injunction against violations of the antifraud provisions and from aiding and abetting violations of the corporate reporting provisions. He also agreed to pay $558,534 in disgorgement and interest plus a penalty of $494,836, and to be barred for five years from serving as an officer or director of a public company.

Salix is now a subsidiary of Bausch Health Companies, which was previously known as Valeant Pharmaceuticals International. The alleged misconduct occurred prior to Salix’s acquisition by Valeant.

Report by Rob Munro