Egalet Corporation was developing a new drug, which was special not for its medical properties but for its abuse-deterrent characteristics. However, the complaint claims that the company knew all along that its was unlikely to get FDA approval of intranasal abuse-deterrent labeling and that its optimistic statements thus violated the Securities Exchange Act of 1934.
The class for this action is all persons who acquired shares of Egalet common stock between November 4, 2015 and January 9, 2017.
Egalet, a specialty pharmaceutical company, develops treatments for pain and other conditions, primarily with its proprietary Guardian Technology, which it describes as “a polymer matrix tablet technology that utilizes a novel application of the well-established manufacturing process of injection molding, which results in tablets that are hard and difficult to manipulate for misuses and abuse.”
The company’s lead product candidate, ARYMO ER, was an oral morphine formulation that used Guardian Technology, and the complaint claims that the company promoted the possibility of both approval and abuse-deterrent labeling from the Food and Drug Administration (FDA). According to the complaint, the value of the drug was not in its unique pain-treating properties but its labeling as contributing to reducing opioid abuse.
For this reason, Egalet designed its studies according to the FDA’s guidance on abuse deterrence, aiming to become the first extended-release morphine drug with labeling for deterrence for all three routes of abuse, intravenous, intranasal, and oral. The complaint claims that labeling for each of the three routes of abuse would be a valuable advantage.
The company’s new drug application said it aimed to show ARYMO ER’s bioequivalence to an already existing drug, MS Contin. If ARYMO ER was indeed bioequivalent, the FDA would be almost certain to approve it. The only issue would be the granting of abuse-deterrent labeling, which the complaint claims the company presented as highly likely at least for the intranasal route.
On January 9, 2017, the company announced that the FDA had approved ARYMO ER and intravenous abuse-deterrent labeling for it.
On the same day, the FDA issued a press release explaining why it had denied ARYMO ER intranasal abuse-deterrent labeling. It said that another company, MorphaBond, had marketing exclusivity for a similar drug for three years, so that “no other single-entity extended-release morphine product … can be approved for that use at this time.”
Over the next two days, the company’s stock price fell by over 28%, from a previous closing price of $8.38 to $5.99. The complaint claims it has continued to fall, to a record low of $2.03 on May 31, 2017.
According to the complaint, MorphaBond’s drug was one of the main expected competitors for ARYMO ER and as such its progress would have been tracked by Egalet. It therefore claims that the company knew ARYMO ER’s prospects for intranasal abuse-deterrent labeling were negative.