Inotiv swings to profit, legal battles continue to grow
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West Lafayette-based Inotiv Inc. is reporting fiscal third quarter net income of $1.8 million, compared to a loss of $3.7 million during the same period last year.
However, the pharmaceutical testing company said in its earnings report that it is facing new shareholder lawsuits primarily related to its acquisition of Envigo RMS Holding Corp. in Indianapolis.
Last summer, a class-action lawsuit was filed against Inotiv, CEO Robert Leasure and Chief Financial Officer Beth Taylor. Our partners at the IBJ reported the lawsuit alleged the company failed to promptly disclose information about animal welfare concerns at an Envigo dog-breeding facility in Cumberland, Virginia.
Once the information was made public – and Inotiv announced plans to close the facility – the company’s stock dropped.
In its quarterly earnings report, Inotiv said it has filed a motion to dismiss, which is currently pending.
“While the Company cannot predict the outcome of this matter, the Company believes the class action to be without merit and plans to vigorously defend itself,” Inotiv said. “We cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for this matter.”
But the earnings report also detailed four additional shareholder lawsuits. Two were filed in the U.S. District Court for the Northern District of Indiana. Both allege “breach of fiduciary duty, abuse of control, gross mismanagement, and waste of corporate assets,” as well as violations of the Securities Exchange Act of 1934 related to the Envigo acquisition.
Another suit was filed in the Tippecanoe County Circuit Court and the fourth was filed in the Indiana Commercial Court of Marion County. Both also allege similar violations as the two federal suits, as well as issues surrounding Inotiv’s non-human primate, or NHP, business.
The courts have issued orders staying any action in three of the suits pending the resolution of the motion to dismiss in the class-action suit. Inotiv still has until Aug. 23 to respond to the Marion County suit.
Late last year, Inotiv was notified of an investigation into illegal imports of non-human primates by its principal supplier, as well as two Cambodian officials from December 2017 to January 2022.
In the earnings report, Inotiv said it previously received subpoenas for documents and information related to its importation of NHPs into the U.S. in June 2021 and January 2022, but said it has not received any additional subpoenas since that time.
However, the company said it received a voluntary request on May 23 of this year from the U.S. Securities and Exchange Commission for documents and information regarding the importation of NHP’s from Asia by Inotiv and its subsidiaries, “including information relating to whether their importation practices complied with the U.S. Foreign Corrupt Practices Act.”
Inotiv said it is fully cooperating with the SEC.
Envigo RMS itself is also the subject of a class-action lawsuit in California alleging violations certain wage and hour requirements under the California Labor Code. Inotiv said a Memorandum of Understanding has been reached between the company and the plaintiffs to settle the case for nearly $800,000, including attorneys’ fees.
“The MOU provides that the parties will negotiate and enter into a definitive settlement agreement, which will be subject to court approval,” Inotiv said. “The MOU contains no admission of liability or wrongdoing by Envigo RMS.”
The company attributes its return to profitability in the quarter to the completion and continued execution of consolidation efforts at many of its facilities around the globe. Among them is the consolidation of two Indianapolis facilities, which was completed at the end of June.
“We are pleased with a solid third quarter as we diligently work towards completing the final stages of many integration projects, optimizing our infrastructure and right-sizing the Company’s global footprint,” Leasure said in a news release. “In addition, we have adapted in response to the industry challenges related to importation of NHPs this fiscal year. Looking ahead, we are preparing the Company for its next chapter of profitability, continuing to improve the client experience and building a Company that can enhance long term value for our shareholders and employees.”
You can connect to the full earnings report by clicking here.