Puma reported $52.6 million in revenue from the sale of Nerlynx during the third quarter, compared to $6.1 million in sales during the same period last year.
Despite strong sales reports, the company’s stock price has slid nearly 80 percent in the past year to $22.61 at the close of trading on Nov. 15. Puma’s market capitalization is hovering around $850 million.
At the heart of the case, filed in June 2015, is whether Puma and its executives misrepresented the drug’s safety and effectiveness prior to approval by the Food and Drug Administration.
Plaintiffs, led by the administrator of a pension fund for school teachers and government workers in the United Kingdom, allege Auerbach misrepresented results from a clinical drug trial during a July 2014 investor call.
They allege he made the drug sound “twice as good and half as bad” as it really was in order to inflate Puma’s stock price for a pending stock offering, according to court filings.
In the three months after the call, Puma’s stock rose dramatically, with prices climbing above $270 a share from below $60 a share.
Clinical trial results revealed a year later raised questions about the drug’s long-term effectiveness and showed a side effect of serious diarrhea. The trial revelations caused Puma stock to plunge to $147 from $210 over two days of trading.
The investor lawsuit – which also alleges document manipulations and forgeries by the firm – hinges on company performance reports about its Nerlynx drug and its impact on the company’s stock price.
Plaintiffs claim damages of $87.20 a share, according to court filings, which could award class members some $1.3 billion if they prevail.
Rash of lawsuits
Yook, whose biotechnology exchange-traded funds include shares of Puma, believes the class-action lawsuit to be meritless.
“I think it’s a disgruntled investor whining over spilled milk,” he said. “We own the stock and are not complaining.”
He said a flood of such class-action lawsuits against biotechnology companies have caused a four-fold spike in the cost of directors and officers’ liability insurance since 2016, which indemnifies executives.
Such policies can now cost companies $1.5 million a year, he said, with many insurance carriers dropping out.
Yook said he can still recall the investor conference call with Auerbach in 2014 that would boost Puma stock to a high of $270 a share.
“Every investor remembers the amazing day,” he said. “But to say Puma was misleading is ridiculous.”
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