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Inotiv’s Revenue in Jeopardy After Primate Smuggling Scandal
Shares of the drug discovery services firm are up 54.7% YTD despite not being able to sell primates that accounted for 25% of 2022 sales.
January 13, 2023
Due to a federal probe into its primary supplier of non-human primates (NHPs) Inotiv (NOTV), a provider of drug development and discovery services, announced it would not be able to file its annual report on time. Federal prosecutors have charged the supplier’s employees and two Cambodian government officials with conspiring to illegally import wild NHPs— only NHPs purpose bred for research are allowed— into the U.S. between 2017 and 2022.

Two of Inotiv’s subsidiaries— each acquired recently— have received federal subpoenas related to the primate scandal.

Though not required to do so, the belated annual report revealed Inotiv has stopped selling its Cambodian NHPs held in the U.S. until it’s sure the NHPs in inventory from Cambodia were purpose-bred. The filing also quantifies the potential fallout.

In fiscal 2022, 25.56% of Inotiv’s revenue was from NHPs imported from Cambodia.

It’s not clear whether Inotiv’s primate verification process will be perceived as trustworthy since its financial statements may not be. Notably, Inotiv also disclosed multiple control deficiencies related to its information technology systems. Separately, one year after disclosing another deficiency related to its accounting for the tax impacts of acquisitions, the matter still hasn’t been fixed.

Despite it all, Inotiv CEO Bob Leasure was given a $1 million discretionary cash bonus and $500k in restricted stock units (RSUs) as a reward for his “significant accomplishments” in 2022. Though Inotiv’s shares are up approximately 54.7% ytd, they’ve lost approximately three-quarters of their value over the last year.

Inotiv’s Board of Directors approved Leasure’s bonus in the same month the company disclosed it would not file its annual report on time and several weeks after it said it “became aware” of the criminal charges related to the primate smuggling scandal.

Public records indicate federal investigators had questioned employees of the subsidiary at the center of the scandal two years prior to Inotiv acquiring it.
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