- Company Name
- Akorn, Inc.
- Stock Symbol
- Class Period
- August 1, 2018 to January 8, 2019
- Motion Deadline
- April 22, 2019
- Northern District of Illinois
The complaint charges Akorn and certain of its current and former officers with violations of the Securities Exchange Act of 1934. Akorn develops, manufactures and markets specialized generic and branded pharmaceuticals, over-the-counter drug products and animal health products in the United States and internationally.
Prior to the Class Period, in May 2018, Akorn was issued a Form 483 by the Food and Drug Administration (“FDA”) documenting health concerns discovered by the FDA during its inspection of Akorn’s Decatur, Illinois facility.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Akorn’s business and operations. Specifically, defendants failed to disclose that: (1) Akorn’s management had misled investors concerning the severity of Akorn’s manufacturing violations at its Decatur, Illinois facility; (2) Akorn’s responses to the FDA’s Form 483 – which contained a list of observations made by the FDA during its inspection of Akorn’s Decatur, Illinois facility in April and May 2018 – would be deemed inadequate by the FDA; (3) Akorn repeatedly failed to correct manufacturing violations at this facility; and (4) the foregoing conduct would subject Akorn to heightened regulatory scrutiny by the FDA. As a result of this information being withheld from investors, Akorn securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $19 per share.
Then on January 9, 2019, before the markets opened, Akorn announced that it had received a warning letter from the FDA, dated January 4, 2019, related to the inspection of its Decatur, Illinois facility in April and May 2018. The warning letter detailed a laundry list of “significant violations of current good manufacturing practice (CGMP) regulations for finished pharmaceuticals.” The violations included, among other things, failing to follow appropriate written procedures designed to prevent contamination of drug products, including inadequate cleanroom design and deficient environmental monitoring and cleaning programs, and failing to follow a written testing program designed to assess the stability characteristics of drug products, including inadequate quality systems. The letter stated that because Akorn had failed to correct repeat violations, the FDA strongly recommended engaging a consultant qualified to assist Akorn in meeting CGMP requirements. In conclusion, the letter warned Akorn that “[f]ailure to promptly correct these violations may result in legal action without further notice including . . . seizure and injunction. Unresolved violations in this warning letter may also prevent other Federal agencies from awarding contracts. Until these violations are corrected, we may withhold approval of pending drug applications listing your facility.”
On this news, the price of Akorn shares fell over 11% to close at $3.48 per share on January 9, 2019.