A securities class action suit has been filed against the drug company Tokai Pharmaceuticals, alleging false and misleading statements and failure to disclose certain problems with a study it conducted.
The lawsuit, recently filed in the U.S. District Court of the Southern District of New York, alleged that the company failed to disclose that there were “noteworthy structural problems” with a trial build known as ARMOR3-SV, as part of the third phase of a prostate cancer study. Due to those issues, the testing did not meet its primary endpoint, and the commercial value of the drug Galeterone is unlikely to be as high as the company originally projected. In addition, the suit alleges that the company’s financial statements contained false or misleading information, or lacked a reasonable basis.
The suit has a class period of June 24, 2015, to July 25, 2016, and anyone who bought or otherwise obtained stock in the company during that time can join the class action.
The specific issues related to the suspension of the trial are a bit complicated. But simply put, an independent body that was tasked with monitoring its proceedings found that based on a plethora of data, the trial would not meet some benchmarks for Galeterone improving radiographic progression-free survival versus competing drugs, Tokai announced in late July. As a result, it recommended that the trial be brought to an end. However, the independent committee did not say there were any specific safety concerns with Galeterone.
“We are very disappointed by this outcome,” said Jodie Morrison, president and chief executive officer of Tokai. “An immediate priority is to analyze the unblinded study data in detail as we evaluate potential paths forward for galeterone and our pipeline. We are deeply grateful for the support and commitment from the patients participating in the study, their caregivers, and the study investigators and their staff.”
Instead, the company plans to go forward with its ARMOR2 test, which is still ongoing, but will monitor it closely, the report said. It also has another study planned for patients who made progress with other drugs in the trial. Further, any patients that had been enrolled in either the ARMOR2 or ARMOR3 tests would be allowed to continue therapy after they talked with both doctors and the officials in charge of investigating the studies.
The financial fallout
When the company announced it would suspend the late stage trial of the drug Galeterone, the company’s stock slumped heavily in just one day, according to MarketWatch. Altogether, its price fell 68 percent in pre-market trading, with trade volume exceeding its daily average four times over.
Indeed, Google Finance shows the company closed July 25, the day of the announcement, at $5.20 per share, down a little bit from a recent high of more than $5.80, but in line with recent averages. When the market opened the next day, the price had already fallen to just $1.55 and continued to slide. Today the stock stands at about $1.15 per share.
Shortly thereafter, the company announced it would trim its relatively small workforce by about 60 percent, the equivalent of 10 full-time jobs, according to Fierce Biotech. It is hoped that this massive cut would save the company about $4.2 million. In announcing the move, Morrison said the decision was “very difficult but necessary” given the disappointing end to the trial.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or firstname.lastname@example.org.