York-based Unilife Corporation accused of misleading investors
York-based Unilife Corporation is facing a federal securities fraud class action after a shareholder-rights law firm helped an investor file a complaint in the U.S. District Court for the Middle District of Pennsylvania.
According to a news release from the firm, Robbins Arroyo LLP, shares of Unilife fell $0.52 per share, or more than 14 percent, on Sept. 4 after publication of a Forbes article discussing Unilife's fiscal year loss of $63.2 million on revenue of just $2.7 million. The report also disclosed that customer demand for Unilife's products was such that the company's primary manufacturing facility was operating at 3 percent of capacity, or approximately 2 million syringes per year.
On Sept. 9, Robbins said, Forbes published an article detailing allegations in a lawsuit filed by a former Unilife employee concerning various regulatory violations at the company and the suppression of internal reports detailing Unilife's inability to produce the company's syringes below cost.
"According to the complaint," Robbins said, "defendants made false and/or misleading statements and failed to disclose that: (i) the company's Unifill syringes failed to comply with the U.S. Food and Drug Administration's ("FDA") validation processes; (ii) the company's Quality Management System failed to comply with FDA's regulations; and (iii) Unilife intentionally increased purchases of Unifill component parts to create the appearance that it was producing at increased volumes despite low customer demand and lack of capacity to support those purchases."
Unilife CEO Alan Shortall today issued the following letter to stockholders about the lawsuit.
"Dear Unilife Shareholders:
"I am writing to you today regarding a lawsuit brought in the US against Unilife Corporation (Unilife), myself, and other officers of the company, which we believe is entirely meritless. This lawsuit has been brought under US securities law by a shareholder holding a very small parcel of shares and mostly repeats the allegations of a lawsuit filed by a former employee, which we are in the process of defending and which we believe to be groundless. The former employee claims that he was terminated in retaliation for reporting alleged regulatory violations by Unilife. However, the former employee was in fact terminated due to poor performance and we believe filed the lawsuit in retaliation after Unilife refused to comply with his demand for severance payments (which he was not entitled to due to the reasons for his termination).
"We are being advised by lawyers in the US with respect to both of these claims and they have informed us that, in the US, securities law claims of this nature are not uncommon as a means of opportunistic lawyers trying to attract clients.
"I am confident that Unilife will prevail with regards to both of these claims and can assure you that Unilife will vigorously defend itself against these actions.
"With respect to the allegations made in these claims, I can assure all of you that Unilife is in full compliance with all applicable regulatory requirements. In 2013 two regulatory compliance audits of Unilife's quality system were performed. Both audits resulted in zero observations, i.e., no deviations from applicable quality standards were noted. In February 2013, the Notified Body NSAI (National Standards Authority of Ireland) performed an audit of our quality system, which is equivalent to an FDA audit for European countries. This audit resulted in zero observations, i.e., no deviations from the applicable standards were found. The auditors' conclusion was that Unilife was in compliance with the applicable standards. In March, the FDA performed an audit of Unilife's quality system and facility. The FDA closed out the audit with no FDA 483 Inspectional Observation issued, i.e., no deviations from the applicable standards were noted.
"Finally, Unilife is in full compliance with all applicable securities laws. As a public company in the US we are subject to a legal system in which employees can sue companies for undeserved compensation while making unfounded allegations with impunity, and plaintiffs lawyers can first advertise for clients and then bring a lawsuit for the mere cost of the court filing fee in the hope that the company will settle with them.
"Thank you for your continued support of Unilife."