Monday, April 18, 2005

Pharma

Serono takes $725M hit for conspiracy case

Serono SA, parent company of Serono Laboratories Inc, said it expects to take a $725 million hit on the heels of this month's indictment of four former top Serono Lab sales and marketing executives on charges of conspiracy and offering kickbacks to doctors.

That charge, aimed at settling the case and revealed this week as part of Serono's first quarter 2005 earnings report , translated into a quarterly net loss of $567.7 million for the Switzerland-based biotech giant, whose subsidiary, Serono Laboratories, is based in Rockland.

News of the estimated $725 million charge, was followed by a dip in share prices - Friday morning shares of Serono were trading at $16.88, down nearly 5 percent from Thursday's close, on a 52-week range of $14.60-$19.60.

The Boston U.S. Attorney's investigation is related to Serono's growth-hormone drug, Serostim, which the company reported had sales of $18.3 million during the first quarter.

The group's principal U.S. subsidiary, Serono Inc., received a subpoena in 2001 from the U.S. Attorney's office in Boston requesting that it produce documents for the period from 1992 through the present relating to Serostim.

On April 14 a federal grand jury indicted the four former top Serono Lab executives on charges of "conspiracy to offer and pay kickbacks to doctors in the form of an all expenses paid trip for the doctors and their guests to attend a medical conference in Cannes, France in return for writing prescriptions of (Serostim)."

Serono obtained accelerated approval from the FDA in 1996 for Serostim to treat AIDs wasting, also known as "cachexia," a condition involving profound involuntary weight loss in AIDs patients.

Serono executives were not immediately available, but said in a released statement the company had "cooperated fully with the investigation and continues to do so." The company also noted in the release its executives believe the case has "advanced to a point where it is now appropriate to take provision that management believes will be sufficient to cover resolution of the investigation related to Serostim."

If convicted on the charges, all four executives - John Bruens, San Diego, Calif.; Mary Steward, North Andover; Melissa Vaughn, Louisville, Colo.; and Marc Sirockman, Flemington, N.J. - could each face up to five years in prison on each count, to be followed by three years of supervised released, and a $250,000 fine per count, according to the U.S. Attorney's office in Boston.