Top officers of MedImmune Inc. improperly inflated its stock price by misleading investors into believing that the budding Gaithersburg drug company's top prospect was on the verge of receiving federal approval, two class-action lawsuits charge.
When that approval failed to come last week, the stock dropped nearly 50 percent in two days.
After a Food and Drug Administration advisory panel voted unanimously Thursday not to recommend marketing approval of MedImmune's pneumonia and bronchitis drug, RespiGam, the company's stock fell 30 percent, to $16 a share, from $23. The next day it dropped $4.25, to close at $11.75. It closed at $12.875 yesterday.
MedImmune's stock began to rise soon after a Sept. 21 health care investment seminar in New York, according to the lawsuits filed in the U.S. District Court in Baltimore. The stock was fueled partly by several "buy" recommendations from Wall Street investment firms, which in turn were based on positive reports from MedImmune Chairman and Chief Executive Wayne T. Hockmeyer. At one point in mid-November the stock closed as high as $31.25 a share.
The class action lawsuits, filed by Baltimore attorney Charles Piven on behalf of two investors, charge that Dr. Hockmeyer and other companyofficials "unlawfully and artificially inflated the market price of MedImmune common stock."
The plaintiffs are Florida resident Oscar Mandelbaum, who bought 200 shares at an average price of $23.50, and Gabor Flamm of New York, who bought 300 shares at $21 a share. The class, if allowed by the court, would comprise everyone who purchased shares of MedImmune between Sept. 21 and Dec. 3.
During that period the stock rose as the company touted RespiGam, which MedImmune says is effective in treating a virus that causes bronchial infections in infants.
Dr. Hockmeyer, the suit maintains, knew but failed to disclose that the test results for RespiGam submitted to the FDA panel were based on flawed clinical studies. The company said its tests were conducted in five sites, but it failed to note that the data were skewed by apparently extraordinary results in Denver, where the initial rate of infections was much higher than at any of the other sites.
Furthermore, some of the doctors and parents in Denver had access to information about which patients received the drug, rather than merely a placebo, according to the FDA and the lawsuit.
The lawsuits do not specify the damages being sought.
MedImmune officials did not return phone calls seeking comment yesterday.
MedImmune has other drugs under study, and has agreed to buy a company that itself has several drugs awaiting FDA approval. But analysts have said RespiGam was the company's strongest prospect.