- Spectrum Pharmaceuticals is facing yet another lawsuit for "false and misleading" claims it made about one of its cancer drugs that one shareholder says hurt the company's value and reputation.
- Stuart Wells, the plaintiff, filed a derivative complaint against the Las Vegas-based biotech in the U.S. District Court of Delaware on Thursday. Spectrum faces at least one other, class action lawsuit related to its claims about Qapzola (apaziquone), a drug aimed at treating non-musclar invasive bladder cancer, as well as multiple other class action cases calling out statements it made about other drugs.
- The derivative complaint holds that Spectrum mischaracterized the likelihood Qapzola would gain approval, highlighting that shareholders were not told the Food and Drug Administration recommended Spectrum not file a New Drug Application (NDA) for Qapzola based on two failed Phase 3 studies, the protocols for which had also been altered without investor knowledge.
The complaint lists 10 Spectrum leaders, including CEO Rajesh Shrotriya, Chief Financial Officer Kurt Gustafson, Chief Medical Officer Lee Allen and Chief Operating Office Joseph Turgeon, as defendants in the case.
Wells said those heads engaged in "unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets," and Securities and Exchange violations based on their portrayal of Qapzola, and cited a variety of sources — from conference calls to legal documents — to prove it.
One of the complaint's main points of contention centered on two Phase 3 trials of Qapzola that were given a green light by the FDA between 2008 and 2009. Qapzola failed to outperform placebo in both of those trials, but the bigger issue is that Spectrum didn't inform shareholders that an analysis of pooled data, which the company used as evidence to show "statistically significant treatment effect in favor of apaziquone," was not part of the original statistical analysis plans the FDA had approved.
What's more, the complaint said the company never signaled the real probability that the drug would not gain approval.
"The analysis of integrated data from 2 completed clinical trials has demonstrated statistically significant increases in 2 year recurrence rates. We have discussed these data with the FDA and are well on our way with preparing our NDA submission this year," Allen said in a May 7, 2015 conference call, according to the complaint. "[T]here’s is a dearth of new therapies, and apaziquone has the potential to be the first new drug approved to treat nonmuscle-invasive bladder cancer in more than 40 years."
Comments such as that, coupled with ignoring the FDA's guidance and keeping data analysis decisions from investors, had a lasting, negative effect on shareholder value, the complaint argued. The company's stock, for example, fell about 15% after an Oncologic Drugs Advisory Committee unanimously voted against the drug's approval.
"As a direct and proximate result of the Individual Defendants’ conduct, Spectrum has also suffered and will continue to suffer a loss of reputation and goodwill, and a 'liar’s discount' that will plague the Company’s stock in the future due to the Company’s and their misrepresentations and the Individual Defendants’ breaches of fiduciary duties and unjust enrichment," the complaint said.
Spectrum did not respond to request for comment.