SEC raps Valeant again over its use of 'non-GAAP' measures

New correspondence from the SEC shows it’s still got issues with Valeant's use of "non-GAAP" financial measures.

Back in May, the SEC raised some red flags over Valeant’s use of “non-GAAP” financial measures. And now, new correspondence from the commission shows it’s still got issues with the drugmaker’s practices.

In a series of letters made available by the SEC Wednesday, the body said Valeant’s non-GAAP adjusted net income was too similar to cash flow and told the company to stop reporting it on a per-share basis, The Wall Street Journal notes.

Valeant responded that it plans to change its non-GAAP reporting and disclosures; its edits are slated to make their debut when the company rolls out its 2017 earnings guidance and could potentially include a new adjusted net income measure, the company said.


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The SEC first got in touch with the Quebec-based pharma over its non-GAAP measures in a letter last December. It took particular issue with the once-acquisitive company’s practice of stripping out pickup-related expenses and also questioned what Valeant meant by “core” operating results, when operations relied on a series of large buys.

SEC staffers are “concerned with your overall format and presentation of the non-GAAP measures and believe revisions to your future earnings releases and investor materials are appropriate,” they wrote.

The SEC gripes join a long list of Valeant problems that seems to just keep getting longer. The drugmaker’s talks with Japan's Takeda over a $10 billion sale of Valeant's Salix business reportedly broke down this week, scuttling a chance for Valeant to pay down a mountain of debt and ease ongoing default worries from investors.

And industry watchers are also still wondering whether more charges are on the way in a federal kickbacks case for the embattled drugmaker or its former C-suiters; U.S. authorities have already charged former company exec Gary Tanner and Andrew Davenport, the former CEO of Valeant-linked specialty pharmacy Philidor, with engineering a multimillion-dollar fraud and kickbacks scheme.

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