Rockwell Medical, Inc.
- Company Name
- Rockwell Medical, Inc.
- Stock Symbol
- Class Period
- November 8, 2017 to June 26, 2018
- Motion Deadline
- September 25, 2018
- Eastern District of New York
The complaint charges Rockwell and certain of its officers with violations of the Securities Exchange Act of 1934. Rockwell operates as an integrated biopharmaceutical company targeting end-stage renal and chronic kidney diseases in the United States and internationally. The Company’s lead branded drug is Triferic, an iron maintenance therapy that replaces the iron lost by patients during hemodialysis treatment.
The Centers for Medicare and Medicaid Services (“CMS”) pays a bundled reimbursement rate per dialysis treatment and does not provide reimbursement for individual drugs. As result, dialysis drugs like Triferic are viewed by providers as an additional cost rather than as a source of revenue. CMS has indicated it would create a formal pathway for new, innovative therapies to receive “separate reimbursement status” outside of the bundled payments for a two-year period so that dialysis providers would have incentive to make those therapies available to patients and patients would not be denied access to new therapies and improved clinical outcomes. During the Class Period, Rockwell was seeking separate reimbursement status for Triferic.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Rockwell’s business and prospects, including that: (1) Rockwell was aware that CMS would not pursue Rockwell's proposal for separate reimbursement status for Triferic; (2) the estimated reserves in Rockwell's Form 10-Q for the quarter ended March 31, 2018 were misstated; (3) there was a material weakness in Rockwell's internal controls over financial reporting which caused the controls to be ineffective during the Class Period; and (5) Robert L. Chioini, Rockwell’s former CEO, had withheld material information regarding Triferic from Rockwell's auditor, corporate counsel and five independent directors of Rockwell's Board. As a result of defendants’ false and misleading statements, Rockwell securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of nearly $7 per share.
Then on June 27, 2018, before the markets opened, Rockwell filed a Form 8-K with the SEC disclosing that its auditor had resigned. According to an e-mail from CMS to Rockwell attached to the Form 8-K, CMS had reviewed the Company’s proposal for separate reimbursement status for Triferic, and “[u]nfortunately, given the other initiatives CMS has underway, [it] w[ould] not be able to pursue this model.” According to Rockwell’s auditor, “this e-mail and its contents are inconsistent with representations made to us by Rockwell, orally and in writing.” The auditor stated that due to the e-mail from CMS, the estimated reserves in the first quarter 2018 Form 10-Q were misstated and had not been corrected and the certifications signed by the defendants attached to the Form 10-Q were “inconsistent with the facts in existence at the time of filing.” Further, the auditor stated that the statements in the Form 10-Q “regarding the status of Rockwell’s request for separate reimbursement with CMS and the prospects for reversal of CMS’s decisions” “should be cleared and more transparent.” On this news, the price of Rockwell shares fell over 16%, to close at $4.41 per share on June 28, 2018.