KV completes investigation; admits deficiencies

By Nick Taylor

- Last updated on GMT

Related tags Kv U.s. securities and exchange commission Kv pharmaceutical

KV Pharmaceutical found deficiencies and instances of noncompliance during its internal investigation, which was launched in response to issues with the FDA and allegations of management misconduct.

The drug maker had a challenging 2008, with recalls, seizures, production suspensions and management changes culminating in the company laying off 700 people in February.

In response KV hired Lachman Consultant Services to review its manufacturing and packaging operations and liaised with other advisors to investigate specific allegations.

Deficiencies in KV’s regulatory policies and procedures were discovered by the audit committee, which also reported instances of noncompliance with the US Food and Drug Administration (FDA) and other healthcare regulations.

In addition deficiencies were reported in KV’s financial analysis and budgeting controls; human resources functions and its employment policies and procedures; and conduct of certain members of the senior management team.

As a result of these findings KV has implemented a remedial framework. This aims to strengthen and enhance a variety of areas, including compliance with the FDA, financial and accounting controls, practices in the employment area.

The framework also calls for the strengthening of corporate governance, enhancement of board oversight and improvements to KV’s compliance with regulations relating to pharma sales and marketing.

In KV’s filing​ with the US Securities & Exchange Commission (SEC) it provides details about what changes will be made to corporate governance and board oversight.

These include relocating the legal department next to the CEO’s office “to facilitate greater access…and more extensive involvement…in corporate governance and compliance matters​”.

In addition certain officers will be granted direct access to non-management members of the board, committees composed of independent directors will be given increased oversight and policies will be reviewed, revised and updated.

Annual report overdue

The New York Stock Exchange (NYSE) has contacted KV over the pharma’s failure to submit its annual report on time, which the company says is a consequence of its internal investigation.

KV has stressed that its internal investigation found no evidence that previous financial reports were not prepared in accordance with generally accepted accounting principles (GAAP).

Having completed the investigation KV is now working on preparing its 2009 annual report but is unable to estimate when it will be filed. KV has until the end of September to submit the report after which the NYSE may, at its discretion, offer the company another six months to file.

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