(CN) - Sharholders accuse AEterna Zentaris of misleading investors about the viability of a new colorectal cancer drug.
"Defendants misled investors about the timing and success of the AEterna's clinical trial that tested whether perifosie was effective treating late stage colorectal cancer. As a result AEterna's stock traded at artificially inflated prices during the class period reaching a high of $2.68 on April 29, 2011," the complaint states.
The Canadian company based in Quebec City originally claimed that perifosie was a wonder drug but its stock price dropped to $.73 a share after the claims turned out to be bogus, according to the lawsuit.
The company touted perifosie as "a novel anticancer agent that modulates several key signal transduction pathways, including Akt, MAPK and JNK that have been shown to be critical for the survival of cancer cells," the complaints states, quoting a company press release.
Along with its partner Keryx Biopharmaceuticals, AEterna began FDA Phase 2 clinical trials and through a special protocol assessment agreement with the agency, the drug was advanced to Stage 3 trials. It was to be used in double blind trials at 40 to 50 sites in the US and would be completed during the second half of 2011.
"It was mentioned that the colorectal cancer, the recruitment will be finished in June 2011, the top line results will be expected in the second half of 2011," CEO and President Jurgen Engle said during a conference call with analysts.
Plaintiff's claim that this was a "false and or materially misleading statement" because the company knew that the Phase 3 trial would not be completed by late 2011. As a result, the company "was able to generate proceeds in excess of $36 million" through ATM (At-The-Market) sales, according to the complaint.
After repeated assurances that the study would be completed and that the company would be filing for permits to sell the drug in Europe and the US, "the company shocked the market" on April 2, 2012, when it issued a press release stating that the drug did not work.
The company "announced that the Phase 3 X-PECT clinical trial evaluating Perifosie + capecitabine (Xeloda) in patients with refractory advanced colorectal cancer did not meet the primary endpoint of improving overall survival verses capecitabine + placebo," the press release said.
AEterna's stock took a dive after the announcement, dropping to approximately 67 percent of its value earlier that day to close at 73 cents a share.
Investors are represented by Richard Gonnello and Francis McConville of Faruqi & Faruqi LLP in New York and by Emily C. Komlossy of Faruqi & Faruqi LLP in Miami.