Investors Say Antibiotic Firm Lied About Health Risks

GREENSBORO, N.C. (CN) – A class of disgruntled shareholders claims in federal court that Cempra’s cover-up of liver-damage risks associated with its lead antibiotic sent its stock prices plunging when the truth was revealed.

Lead plaintiff Sheri Pasqual sued Cempra Inc. in Greensboro, N.C., federal court last week, alleging that the pharmaceutical company “artificially inflated prices” of its stock shares by glossing over serious red flags that arose in clinical trials for an antibiotic meant to treat pneumonia and gonorrhea.

Pasqual says she bought Cempra stock after its executives marketed its solithromycin product as not only safe, but as an upgrade over a similar antibiotic that came under Food and Drug Administration scrutiny in 2007 for adverse liver effects.

Her purchase initially appeared to be a shrewd one, with Cempra stock prices skyrocketing amid the company’s marketing blitz and topping out at a rate of $32.81 per share in November 2015.

But shareholders’ fortunes took a tumble when the FDA released a report a year later stating that Cempra’s clinical trials for solithromycin actually “highlighted a significant safety signal for hepatoxicity and drug-induced liver injury,” according to the 18-page lawsuit.

Stock prices plummeted after that, falling 61 percent to a low of $7.30 per share less than a day after the FDA released its report, the complaint states.

Cempra execs allegedly “deceived the investing public regarding [the] prospects” of its solithromycin drug, despite knowing about the red flags raised by their clinical studies.

Their omissions constitute fraud and violate the federal Securities Exchange Act, Pasqual claims.

Not only did Cempra conceal drug data, its head honchos outright deceived the public about the chances of liver damage associated with the antibiotic, according to the lawsuit.

Cempra CEO and co-founder Prabhavathi Fernandes allegedly dismissed the risks of the drug on multiple occasions, having assured attendees at a January 2016 healthcare conference that the company was “very pleased with the safety of [the drug] as well as the efficacy.”

“We did not believe we have any side effects of liver toxicity in [the] particular patients” who were monitored for an increase in liver enzyme activity after taking the drug, she reportedly said at the conference.

Fernandes and her staff “employed devices, schemes and artifices to defraud” consumers and keep them from making an informed decision about the value of Cempra stock, Pasqual claims in the suit.

Pasqual is seeking unspecified damages on behalf of herself and a proposed class of Cempra stockholders.

A public relations representative for Cempra said Sunday that the company declined to comment on the allegations in the complaint.

Along with Fernandes and Cempra, the complaint also names as defendants Mark Hahn and David Oldach, the company’s CFO and Chief Medical Officer, respectively.

Pasqual is represented by L. Bruce McDaniel of McDaniel & Anderson in Raleigh, N.C.

McDaniel is joined by several San Diego co-counselors: David Walton and Trig Smith of Robbins, Geller, Rudman & Dowd, and Frank Johnson, Brett Weaver and Phong Tran of Johnson & Weaver.