The pharma company Insys Therapeutics, Inc., and certain of its executives were recently named as defendants in a securities class action lawsuit alleging the company did not have proper controls on its internal financial reporting. To learn more about this case, visit Battea’s Insys Therapeutics case summary.
Specifically, the suit stems from an issue for the company, in which it disclosed that it overstated its net revenue for the full year of 2015, as well as misstated its sales allowances for 2016. As a consequence, the class action lawsuit alleges the company did not have effective controls on its financial data and that, therefore, all public statements it made with respect to its financial standing were materially false or misleading at all relevant times.
The suit was filed in the U.S. District Court for the Southern District of New York, and has a class period from Feb. 23, 2016 – when its full-year 2015 financial results were initially reported – through March 15, 2017, when the reporting issues came to light. In addition to the company itself, the suit also names former chief medical officer and current interim CEO Dr. Santosh Vetticaden, as well as chief financial officer Darryl Baker defendants.
The company’s statement
On March 15, Insys announced that it would have to delay releasing its full-year and fourth-quarter 2016 financial results because an audit of the company’s financial processes turned up a few irregularities. The review is still ongoing and no further announcements have been made about the status of the company’s 2016 financial reporting.
Specifically, the review of 2015’s financial data found that he company would potentially have to reduce its net revenue and pre-tax income by less than $5 million, as well as increase its sales allowances for 2016, in addition to extending payment terms for certain customers in the third quarter of 2016.
“The company and the audit committee are working diligently to complete their review and the company will make a further announcement regarding updated timing of its release of financial results and a related conference call once the review is completed,” Insys said in its release.
How was the stock price affected?
The price of Insys stock has been on a steady decline for some time now, having begun the class period at about $17.50 per share. It reached a recent peak in mid-August 2016, at $18.37, but has been falling somewhat steadily for most of the time since. By the end of 2016, it was trading at just $9.20 per share but recovered slightly over the next few months.
However, once the company announced the delay of its full-year and fourth-quarter 2016 financial results, the stock price took an even more significant hit, falling from $13.48 per share the day before the results were supposed to be released to lows of $9.97 in mid-March. Today, stock in Insys trade at $10.90 per share.
For more information on this case or other class action litigations, please contact Sam Wankel, Senior Vice President, Research, Battea Global Litigation Research, Inc., at 203-987-4949 or firstname.lastname@example.org.