The U.S. Department of Justice is set to announce charges against Valeant Pharmaceuticals (VRX) executives for engaging in "a multi-million dollar fraud and kickback scheme."
Both Gary Tanner, a former executive at Valeant, and Andrew Davenport, the former CEO of pharmacy benefit manager Philidor Rx Services will be charged.
Drugmaker Valeant has been under the microscope for its alleged accounting problems and steep price hikes on drugs the company acquired during years of acquisitions fueled by debt. Tanner was ousted earlier this year, as was the company's CFO Howard Schiller. In March Valeant pinned the blame for these issues on both its former CFO and CEO. It's important to note though, that neither Schiller nor former CEO J. Michael Pearson were involved in the latest charges.
"The company, former CEO, former CFO, and current executives have not been charged at this time," Valeant officials said in a statement. "Gary Tanner ceased to be a Valeant employee on September 13, 2015, and Andrew Davenport has never been an employee of the company."
The officials added that the allegations Davenport and Tanner engaged in were to defraud Valeant as a company.
A press conference on the matter will be held at the U.S. Attorney's Office in the Southern District of New York at noon Thursday.
Valeant's shares, which have already taken a massive hit this year, fell another 5.5% on the news, hitting $16.90 per share Thursday morning.
This is after shares tumbled 25% just a week ago, on Nov. 8, when the beleaguered company reported dismal third quarter earnings.
Valeant has struggled since short-seller activist Andrew Left of Citron Research issued an eight-page note in October 2015 alleging that there was a secret relationship between Valeant, mail-order pharmacy Philidor, and a Philidor customer, R&O Pharmacy LLC that falsely boosted Valeant drug sales.
During its third quarter earnings call, the Laval, Canada-based drugmaker didn't only cut its 2016 outlook to a level that the new CFO Paul Herendeen said he "feels good about the quality of."
Herendeen also admitted on the conference call that the company's revenues and Ebitda are anticipated to fall below 2016 levels in 2017-a statement that prompted CEO Joseph Papa to step in to say that the company is "not trying to give '17 guidance.
Officials from the U.S. attorney's office could not be reached for comment.
After shaking up its management, the drugmaker in March added activist investor Bill Ackman to its board of directors. His Pershing Square Capital Management LP holds a 9% stake in the drug company and already has another executive, Stephen Fraidin, on Valeant's board. Pershing is Valeant's largest shareholder. Pershing officials declined to comment.