A securities class action suit was filed against a biopharmaceutical company and certain officers following allegations that the defendants violated federal securities laws.
The lawsuit against KaloBios Pharmaceuticals Inc. was filed in the U.S. District Court for the Northern District of California on behalf of investors who purchased shares in the company during the class period between Nov. 19, 2015 and Dec. 17, 2015, according to a press release. The class action complaint claims that the defendants made false and/or misleading statements and failed to disclose certain material adverse facts to investors. KaloBios is a biopharmacutical company involved in developing therapies that use monoclonal antibodies to help cancer patients.
“On Dec. 17, 2015, Shkreli was arrested by federal authorities.”
The class action filing claims that investors were not informed that Martin Shkreli was the subject of a federal criminal investigation. It also alleges that the company did not disclose that its CEO was involved in a plan concerning illegally using stock from Retrophin Inc. to pay off other business debts. The lawsuit claims that discovery of the aforementioned details would have had a negative impact on the company’s operations and prospects. The lawsuit concluded that all of the defendants’ statements regarding the company’s operations, business and prospects were false and/or misleading during the relevant class period.
Before the market opened, on Dec. 17, 2015, Shkreli was arrested by federal authorities after a grand jury indictment on seven counts of fraud. The controversial pharmaceutical executive was, according to federal prosecutors, “running his companies like a Ponzi scheme.” They claim he used each new company to pay debts originated through a prior one.
On news of Shkreli’s indictment and arrest, KaloBios shares dropped $12.56 per share, or about 53 percent, during pre-market trading Dec. 17. Before the market opened KaloBios securities trade was halted. On Jan. 13, 2016, the company resumed trading shares. By Feb. 11 it closed at $1.91 per share.