Cipla Medpro CEO Suspended Over "Serious Allegations"
Cipla Medpro CEO, Jerome Smith was suspended this week following “serious allegations” made against him, however the board are currently remaining tight lipped on what those allegations could be.
The decision taken by Cipla, the third largest pharmaceutical company in South Africa, to suspend its chief executive was taken at a board meeting held on Tuesday and announced on Wednesday. The share price of South Africa’s Cipla Medpro dropped by 9.4 percent on Thursday afternoon after the surprise suspension.
The statement, available in full here, mentions unspecified “serious allegations” concerning Mr. Smith, while seeking to reassure shareholders that “the board did not take this step lightly and without very long, careful and considered thought.”
The chairman of the board, Sbu Luthuli, declined to go into details about Mr. Smith’s conduct at an earnings presentation on Thursday, but was quick to mention that the matter did not affect the financial standing of Cipla, and that “you are not going to think that suddenly there is 100 million rand missing from the company.” He also stated that the company’s long-standing supply arrangement with Indian generics giant Cipla Ltd would not be affected by the investigation into Mr. Smith.
Pending the outcome of the investigation, the board have appointed erstwhile independent, non-executive director Johan du Preez as their new CEO. Wednesday’s statement claimed “full confidence” from board members that Mr. Preez, previously a CEO of three companies and the managing director of SAAD holdings, was best suited to ensuring that business continued as usual.
While Cipla Medpro claims to be one of the fastest growing pharmaceuticals in South Africa, the past year has not been plain sailing for the firm. Earlier in the year it suffered a drop in sales, and a corresponding drop in share price, due to delayed government approval for medicines including AIDS treatments. Two months ago the company incurred losses of R80 million from a settlement with Reckitt Benckiser, in contrast with last year where Cipla’s income was boosted by a settlement with Pfizer. This sudden drop in profits from one year to the next could explain why Mr. Smith has found himself in trouble with the board – but until Cipla decide to release further information, nothing is certain.