(CN) – Once high-flying biotech firm Intercept Pharmaceuticals faces a derivative action after the company’s share price collapsed when the FDA revealed that 19 patients died after taking its flagship drug Ocaliva.
Gregg Davis filed a derivative action on behalf of Intercept Pharmaceuticals, a biotech company focused on the treatment of liver disease, against CEO Mark Pruzanski, CFO Sandip Kapadia, and 10 members of the company’s board of directors.
Three years ago, Intercept’s share price traded at a high of $462.26 on news that its drug Ocaliva, a treatment for a variety of chronic liver diseases, had been successful in trials.
Ocaliva was approved for treatment of the rare liver disease primary biliary cholangitis (PBC) in 2016, but Intercept is currently testing the drug for the treatment of nonalcoholic steatohepatitis (NASH), a disease that affects up to 12 percent of Americans – a huge unserved market that would send Ocaliva sales skyrocketing.
But company executives have “repeatedly and brazenly misrepresented the efficacy and safety of Ocaliva for all doses,” according to Davis’ complaint. “Intercept’s public statements failed to report that Ocaliva had undisclosed safety risks, including death to patients suffering from PBC.”
In September 2017, the company issued a letter warning doctors against overdosing.
One week later, the FDA issued a safety warning regarding Ocaliva, pointing to the deaths of 19 PBC patients who suffered serious injuries to their livers after beginning the treatment.
Since then, Intercept’s share price has fallen over 50 percent from a high of $117.52 to close at $53.41 on January 9.
“Analysts noted that revelations concerning the adverse side effects of Ocaliva’s use in the treatment of PBC, and concealment thereof, jeopardizes Intercept’s attempt to gain approval for use of Ocaliva to treat NASH,” the complaint states.
Davis seeks damages against the individual executives for money lost by the company due to their alleged breach of fiduciary duty.
CEO Pruzanski received total compensation of $4.8 million in 2016, while Kapadia received $4 million. Board members each received between $360,000 and $630,000 for their services.
The lawsuit also seeks to put forward various resolutions for stockholder votes on various by-law amendments to strengthen corporate internal governance procedures.
Davis is represented by Thomas G. Amon in New York, and Brian J. Robbins with Robbins Arroyo LLP in San Diego.