SAN DIEGO (CN) — Shareholders of Ligand Pharmaceuticals filed a federal class action Thursday accusing the company of overstating its assets and exaggerating its financial picture, causing its share price to plummet 5 percent in just two days once the problems came out.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” the shareholders say in the lawsuit, which does not give an estimate of their losses.
The complaint also names Ligand’s CEO John Higgins and CFO Matthew Korenberg as “controlling persons.” It was filed just four days after the company formally notified the Securities and Exchange Commission that it would be restating several financial reports it had submitted over the previous year.
The class is represented by Laurence M. Rosen of The Rosen Law Firm in New York, and the lawsuit appears to be the first to reach the courthouse since Ligand’s notice to the SEC. Another New York firm, Bragar Eagel & Squire, issued a statement Friday saying that it, too, had sued.
More litigation seems likely. Since Ligand disclosed Nov. 9 that it might restate its financials, another seven law firms issued formal statements declaring they were investigating the company.
Neither Rosen nor a spokesman for Ligand responded to emails seeking comment.
The San Diego-based company specializes in “developing or acquiring technologies that help pharmaceutical companies discover and develop medicines,” according to its website. The company focuses on “drug discovery, early-stage drug development, product reformulation” and then partnering with other companies that handle late-stage development, regulatory management and commercialization, the site says.
Its medicines include Promacta, an oral medicine to increase platelets in blood, and Kyprolis, used to treat multiple myeloma.
The class’ lawsuit largely paraphrases statements in Ligand’s formal SEC notice. They say that in previous SEC reports the company had “overstated the value of certain deferred tax assets by approximately $27.5 million or 13 percent,” misclassified some short-term debts as long-term debts and did not have effective controls over its financial reporting, among others claims.
Therefore, “Defendants’ statements about Ligand’s business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times,” the class says in the lawsuit.
The investors seek damages on violations of section 10(b) of the federal Exchange Act and the SEC’s Rule 10b-5 regarding false or misleading statements that deceived investors.