Analysts with Sterne Agee wrote in a research note Monday that Raleigh-based Salix Pharmaceuticals accounting problems may be overdone.
Salix has lost 27 percent of its market value since it restated its drug inventory levels in November, increasing them from roughly three months to nine months. The revisions raised concerns that Salix may be forced to restate its previous earnings.
Analysts Shibani Malhotra and Austin Nelson say they believe that a restatement of earnings may not be required.
“We have sifted through the company’s disclosures and conducted a back of the envelope analysis of historical wholesaler inventory levels since 2010 that leads us to believe that these levels have been consistently high, suggesting that historical earnings may indeed be accurate, while management’s prior characterization of the situation was likely misleading,” they wrote.
Salix's board of directors has hired outside counsel and formed an audit committee to review the way the company had earlier characterized inventory levels. Last week, the company announced that it was expanding its board to include more independent members. The new members are expected to be added in the first quarter of next year.
Sterne Agee has a target price for Salix’s stock of $130. The shares opened trading Tuesday at $101.59.