UPDATE: Aegis Capital Downgrades SciClone Pharmaceuticals to Hold on Financial Restatement Due to NovaMed Accounting Errors
In a report published Monday, Aegis Capital downgraded its rating on SciClone Pharmaceuticals (NASDAQ: SCLN) from Buy to Hold.
Aegis Capital noted, “SciClone recently announced that it will restate the financial statements for Q2-Q3 of 2011 and Q1-Q3 of 2012 due to accounting errors in its China subsidiary NovaMed. According to the firm, this will likely increase 9-month 2012 revenue by ~$3mm and before-tax income by ~$2mm, as well as decrease FY2011 revenue by ~$1mm and before-tax income by <$1mm. The issue primarily pertains to the timing of Pfizer products revenue recognition within NovaMed, which was effectively a “sell-through” method as opposed to the “sell-in” method originally drafted with the distributor. The Pfizer products had combined revenue of ~$9mm for FY2011 and 9-month 2012. The accounting issue also pertains to recognition of product return reserves for Aggrastat, another product sold by NovaMed. Aggrastat had combined revenue of ~$3.6mm for FY2011 and 9-month 2012. The restatement is slated to be presented with the coming 10-K. On a separate note, SciClone's auditor Ernst & Young decided not to stand for re-appointment after the restatement and 2012 10-K. In the wake of this news and the uncertainty the firm faces in securing another prestigious public accounting firm to act as auditor, we are downgrading our rating to Hold without a price target on SCLN shares.”
SciClone Pharmaceuticals closed on Friday at $4.82.
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Tags: Aegis Capital