CHICAGO (CN) - A securities class action claims a drugmaker defrauded investors with bogus claims about a drug for female sexual dysfunction, and that Biosante Pharmaceuticals shares sank by 77 percent in a day when the truth came out.
Lead plaintiff Thomas Lauria sued Illinois-based Biosante Pharmaceuticals and its CEO Stephen M. Simes in Federal Court.
Lauria claims Biosante and Simes pushed a "new experimental compound, LibiGel," with false claims about "satisfying sexual events" and its being "the most clinically advanced pharmaceutical product in the U.S."
The complaint states: "BioSante is a specialty pharmaceutical company focused on developing products for female sexual health and oncology. Over the past decade, BioSante has been in the process of developing LibiGel, a drug designed to improve the sex drive of women suffering from female sexual dysfunction, specifically hypoactive sexual desire disorder ('HSDD')."
Lauria claims: "Defendants ... consistently misled investors about the commercial viability, effectiveness, and market potential for LibiGel. Defendants boasted about LibiGel's efficacy over placebo, and provided supposedly concrete 'data' regarding the drug's 'statistically significant' effect on increasing the 'number of satisfying sexual events' for women suffering from HSDD. These purportedly positive clinical trial results furthered defendants' claims of LibiGel being 'the most clinically advanced pharmaceutical product in the U.S.' Defendants raised investors' expectations by analogizing the female market for LibiGel to such blockbuster drugs as 'Viagra, Levitra, and Cialis.'
"As expected, these materially false and misleading statements excited investors and analysts alike. As a result, BioSante's stock traded at artificially inflated prices during the class period, reaching a high of $3.81 on July 12, 2011. ...
"Defendants took advantage of this uninformed yet favorable market by completing three separate offering[s] during the class period for shares of the company's common stock. "In total, these offerings raked in over $85 million in net proceeds for the company.
"LibiGel's actual performance and efficacy, however, fell woefully short of defendant's false statements. On December 14, 2011, BioSante issued a press release disclosing for the first time to investors that LibiGel failed to yield positive results in large-scale efficacy tests designed by the company. According to the clinical trial results, women treated with LibiGel did not experience a statistically significant increase in either total satisfying sexual encounters or sexual desire. In fact, in the double-blind, placebo-controlled trial, LibiGel did not fare significantly better than the placebo.
"These surprisingly poor clinical trial results sent BioSante stock careening from a closing price of $2.12 to $0.48 in one day. The company's shares continued to slide until they hit a low of $0.38 per share. Since the truth emerged, shares of BioSante have lost over 75 percent of their value."
Hypoactive, or "a persistent lack of or absence of sexual desire, fantasies, or thoughts," is "the most common form of female sexual dysfunction," according to the complaint. "Approximately 43 percent of women ages 18-59 experience some form of sexual dysfunction. As a result, the anticipated U.S. Food and Drug Administration ('FDA') approval of LibiGel was touted as a huge breakthrough."
LibiGel is "a gel formulation of testosterone designed to be quickly absorbed through the skin after application on the upper arm, delivering testosterone to the bloodstream evenly over time and in a non-invasive and painless manner," the complaint states.
Lauria says he bought BioSante stock because of its misleading statements.
He seeks class certification and damages for securities violations.
He is represented by Norman Rifkind, with Lasky & Rifkind.