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Shares of DRI Healthcare Trust fell as much as 32 per cent, the most since it went public more than three years ago, after its chief executive departed under scrutiny over expenses.
The Canadian pharma royalty company said the board asked for and received the resignation of chief executive Behzad Khosrowshahi. DRI has launched an investigation, with the help of lawyers and forensic accountants, into “irregularities related to certain alleged consulting and other expenses” that Khosrowshahi presented, it said in a statement Monday.
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Chief financial officer Chris Anastasopoulos was suspended with pay, pending the outcome of the investigation. Board chair Gary Collins, a former politician in British Columbia, was named interim chief executive.
DRI said it has identified $7.5 million that may be owed to the trust based on the information it has so far. A related company that manages the trust is making a payment for that amount, it said.
DRI, which holds royalty streams on drugs for various forms of cancer, psoriatic arthritis, spinal muscular atrophy and other conditions, generated $151.4 million in net revenue in the 12-month period ended March 31.
The management shake-up prompted a downgrade from Stifel Financial, which cut its rating to hold from buy, citing limited upside for the company as the investigation continues.
National Bank of Canada analyst Zachary Evershed said his team wasn’t “overly concerned” about the financial impact of these irregularities because they’re relatively small and will be reimbursed by the external management firm.
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“Our main concerns are the impact of the firm’s reputation and potential weakening of the bench impacting the trust’s growth trajectory,” Evershed said in a note to clients.
Shares of DRI were down 28 per cent to $10.91 as of 1:12 p.m. in Toronto.
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