said Thursday it would restate earnings going back to 2003 as part of a government review of the company's stock-option grants and practices.
The Marlborough, Mass., drugmaker, best known for the insomnia drug Lunesta, also said it won't be able to file a timely second-quarter financial report with the
Securities and Exchange Commission
because it must complete an internal review of its options activities going back to 1996.
"Management and our audit committee determined that such financial statements and all earnings releases and
certain documents filed with the SEC relating to periods commencing on January 1, 2003, should no longer be relied upon," the company said.
said it has identified "certain issues" relating to stock-option practices since 2003. "The company and its auditors have not completed their analysis and thus have not yet determined whether any accounting changes will be necessary and whether the company will need to restate previously issued financial statements," the Cambridge, Mass., drug company said.
The SEC has been looking into allegations of stock-option abuse involving more than 80 companies in many industries. The agency's actions have ranged from informal inquiries
to filing criminal charges.
Sepracor announced on June 2 that the SEC had requested documents relating to its option grants and practices. The company appointed a committee of outside directors to investigate the matter. Preliminary results show "the measurement dates for certain stock-option grants to employees, officers and directors during prior periods differed from the recorded dates," the company said.
One reason for such discrepancies is the discovery of options whose effective dates "may have preceded" the dates of receipt for all signatures and approvals, Sepracor said. Another reason was that some option awards "were approved with exercise prices lower than fair market value on the effective date of grant."
Thursday's announcement didn't appear to hurt Sepracor's stock, which was up 72 cents, or 1.5%, to $47.69.
That wasn't the case for Alkermes. The company said it will delay filing its second-quarter financial statement with the SEC for a few days "to provide time for the company to finalize with its auditors the accounting treatment for certain stock option grants." The stock was off 47 cents, or 2.8%, to $16.10.
Alkermes said it was contacted by the SEC about the possible backdating of annual option grants in 1999 and 2000. "The company has cooperated fully with the SEC's informal inquiry, which is ongoing," Alkermes said.
A committee of directors began investigating option practices for 1999, 2000, 2001 and 2002 with the assistance of outside legal counsel and accounting consultants. The committee "concluded that nothing has come to its attention that would cause it to believe that there are any instances" of backdated options from 1999 through 2002.