Thursday, Nov. 6: A day that will live in infamy at Salix Pharmaceuticals.

The company focuses on gastrointestinal diseases, and there must have been a lot of sour stomachs in the executive suite on its latest earnings day.

The chief financial officer at Salix (Nasdaq: SLXP) is out; the Raleigh-based drug company reported inventory of a leading product is months higher than previously reported; and Wall Street dumped Salix shares with the price plummeting 40 percent. Salix also missed earnings estimates by 2 cents a share.

The wave of news triggered an immediate, huge sell-off.

Shares fell to $83.04 from $138.55 in after-hours trading, down more than $55. That’s a far cry from a 52-week high of $172.98 when talk about possible mergers drove up investor interest.

Meanwhile, the Wall Street Journal is reporting that inventory problems were a reason why talks with drug giant Allergran about a possible merger fell through.

A merger was estimated to be worth as much as $10 billion. Salix also recently called off a proposed merger with Cosmo Pharma in Ireland, citing U.S. tax policy. That deal was valued at some $2.7 billion.

Three law firms immediately announced potential lawsuits.

So when CEO Carolyn Logan (a board member and CEO for more than a decade) opened an earnings conference call with analysts, the knives were out.

it began with the first question from David Amsellem of Piper Jaffray – and didn’t stop as analyst after analyst peppered Logan and newly installed CFO Tim Creech, a veteran Salix executive who replaced Adam Derbyshire. Derbyshire’s departure was announced earlier in the day as a resignation “effective immediately.”

Amsellem: “So you’ve said historically that there were 10 to 12 weeks of XIFAXAN inventory on hand. Now we’re being told 9 months on hand. So how do you square that? And I guess the other way of asking that, given your comments on inventory on the last couple of calls, how can we now say that those comments were not misleading?”

Logan: “David, unfortunately, we really can’t comment on that, as I mentioned earlier. The [Salix] Audit Committee has retained outside counsel, and they are conducting a review of this. And to preserve the integrity of that process, it’s just not appropriate for me to comment.

“However, I do want to say, and I think I said it in the script, but management believes that the company’s accounting in relation to sales to wholesalers has been appropriate, and that any questions related to that have all been vetted. Our auditor, Ernst & Young, has conducted its quarterly reviews for each of the 3 quarters. They’ve also informed us that they stand by their unqualified opinion in respect to their 2013 audited financial statements. So we do not think there are any issues there.”

Creech: “And let me tell you why we think — why do have confidence in the numbers we have given you today. As we disclosed, we began the process of negotiating [agreements with distributors called DSAs], and we have gotten some inventory data from our major wholesalers and compared that to our estimate, which was based on our total inventory estimates based on our internal shipments. And those numbers are consistent with that numbers we received from the wholesalers.”

Amsellem seemed frustrated by the answers.

“Okay,” he said. “And I guess the comment is, I don’t know how you square 10 to 12 weeks which is what you’ve said historically versus what we’re being told today of 9 months. But I guess, I’ll just jump back in the queue.”

Numerous other analysts also weighed in. Logan and Creech declined to discuss the board’s internal review in any detail.

The full transcript can be read online at financial news site SeekingAlpha.