Eagle Pharmaceuticals (OTC:EGRX), Inc. has announced the dismissal of its previous independent registered public accounting firm, Ernst & Young LLP (EY), and the appointment of BDO USA, P.C. (BDO) to take over audit services for the fiscal years of 2022, 2023, and the upcoming 2024. The decision, approved by the Audit Committee, was made on November 21, 2024, and disclosed in a recent SEC filing.
EY's audit reports for the fiscal years ended December 31, 2022, and 2021, were not originally qualified or modified. However, due to issues identified during the fiscal year ended December 31, 2022, which warranted a restatement of financial statements, Eagle Pharmaceuticals has since determined that those statements, along with others from subsequent quarters, should no longer be relied upon.
The company has cited material weaknesses in its internal control over financial reporting, leading to a delay in reporting and the need to restate financial statements for several periods.
Throughout the fiscal years ended December 31, 2023, and 2022, and the subsequent interim periods up to November 21, 2024, there were no disagreements with EY on accounting principles or practices that would have required reporting. However, due to the identified material weaknesses, EY had to expand its audit scope, which was not completed before their dismissal.
Eagle Pharmaceuticals has authorized EY to respond fully to inquiries from BDO concerning the aforementioned issues. BDO was appointed as the new auditor on November 26, 2024, following the Audit Committee's approval. Prior to the appointment, there were no consultations between the company and BDO regarding the application of accounting principles or any disagreements or reportable events.
The company has provided EY with a copy of the disclosures in the SEC filing and has included a letter from EY agreeing with the statements made in the report. The transition to BDO is expected to cover the restatement process and auditing for the fiscal year ending December 31, 2024.
This development comes after Eagle Pharmaceuticals' common stock was delisted from The Nasdaq Stock Market LLC due to non-compliance and began trading on the OTC Expert Market on October 4, 2024, under the symbol "EGRX". The information in this article is based on Eagle Pharmaceuticals' SEC filing.
InvestingPro Insights
Eagle Pharmaceuticals' recent accounting firm transition and financial restatements have occurred against a backdrop of significant market volatility. According to InvestingPro data, the company's stock has experienced a dramatic 47.19% return over the past week and a 60% return over the last month. This recent uptick comes after a challenging period, with the stock having fallen 88.63% over the past year.
InvestingPro Tips highlight that Eagle Pharmaceuticals generally trades with high price volatility, which is evident in its recent price movements. The stock's current price of $0.96 represents just 11.34% of its 52-week high, underscoring the magnitude of its recent decline.
Despite the recent positive momentum, investors should note that Eagle Pharmaceuticals suffers from weak gross profit margins and its valuation implies a poor free cash flow yield, according to InvestingPro Tips. These factors may be particularly relevant as the company navigates its financial restatements and works to regain compliance with reporting requirements.
For those seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Eagle Pharmaceuticals, providing deeper insights into the company's financial health and market position.
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