GeoPharma, Inc. (Nasdaq: GORX) is a pharmaceutical company that manufactures primarily dietary supplements, generic drugs, and health products.
Several purported shareholder class action lawsuits have been filed against GeoPharma and certain of its present and former executive officers in two United States federal courts of New York and Florida for violation of federal securities laws. The New York and Florida filings have substantially similar allegations.
The first Complaint filed in the United States District Court for South District of New York alleges that GeoPharma and individual Defendants issued false or misleading public statements in violation of the law. Specifically, the Complaint alleges that GeoPharma claimed that it was developing a "patent-pending" drug for the treatment of oral inflammation suffered by cancer patients known as mucositis. The product was dubbed Mucotrol (TM). On December 1, 2004, GeoPharma issued a statement announcing that Mucotrol had been approved by the FDA. On this news, GeoPharma shares shot up on heavy volume, reaching $11.25 per share. Shortly thereafter, however, investigative journalists uncovered that the FDA had not approved any such drug. It was then conceded by the Company that Mucotrol was a "device", not a drug. This is a material difference. Nor was it the case that Mucotrol contained any medicinal ingredients at all. GeoPharm's sales projections were also called into question. On these revelations, GeoPharma shares sharply declined, last trading at $6.81 per share before trading was halted at 1:29 p.m. The first lawsuit was filed on behalf of all who purchased GeoPharma’s securities on December 1, 2004.
On December 20, 2004 the law firm of Vianale & Vianale filed a separate securities class action lawsuit in the United States District Court for the Middle District of Florida declaring an extended Class Period.
The Florida action was filed on behalf of purchasers of the securities of GeoPharma’s securities from July 13, 2004 to December 2, 2004, inclusive. The Complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On July 13, 2004, before the market opened for trading, GeoPharma and its wholly owned subsidiary, Belcher Pharmaceuticals, Inc., issued a press release reporting that GeoPharma had met with success in a clinical study of its drug, MF5232, later named "Mucotrol," in treating patients with mucositis. Mucositis is an inflammation of the mucosa of the mouth that develops in cancer patients receiving radiation therapy and some patients with HIV/AIDS. In the press release, GeoPharma's President, Dr. Kotha Sekharam, described Mucotrol (which he invented), as a "drug." The stock rose 13% on the news and closed on July 13, 2004 at $5.44.
The later Complaint also alleges that on December 1, 2004 GeoPharma announced in a press release that its subsidiary, Belcher Pharmaceuticals, Inc., had received FDA approval for its "prescription drug," Mucotrol. GeoPharma estimated that sales to the U.S. oncology market for Mucotrol could reach $75 million to $300 million per year. GeoPharma stock rose to $11.25, or 153%, on the news. On December 2, 2004, however, financial reporters learned after questioning the Company that Mucotrol was not a "drug" at all, but a device, making it far less attractive to market than a new drug. GeoPharma's claim that it had obtained FDA approval of Mucotrol was also untrue, as well as GeoPharma's announcement of potential annual U.S. sales of $75 million to $300 million. GeoPharma recanted its claim that Mucotrol was a drug in a December 2, 2004 press release. GeoPharma's stock price dropped from $11.25 to $6.81, on inordinate volume of 42 million shares traded.
In a press release dated October 4, 2005, GeoPharma, Inc. announced that a lawsuit alleging that the Company violated federal securities laws by issuing false or misleading public statements relating to the Company's December 1, 2004 announcement of Mucotrol's(TM) clearance by the FDA was dismissed on September 30, 2005 without prejudice by a judge in the United States District Court for the Southern District of New York. The judge did allow Plaintiffs twenty days to attempt to replead their claims.
In a press release dated October 27, 2005, GeoPharma was informed that on October 24, 2005, a Second Amended Class Action Complaint was filed by Plaintiffs in the federal securities class action against GeoPharma relating to GeoPharma's medical device Mucotrol(TM). The Plaintiff's earlier Complaint had been dismissed by the Court, with leave to replead by October 24. The Company once again planned to move to dismiss the action.
According to a press release dated January 30, 2006, GeoPharma announced that the Amended Class Action Complaint against GeoPharma relating to its announcement of FDA approval for the Company's medical device Mucotrol(TM) was dismissed on January 27, 2006, with prejudice, by a judge in the United States District Court for the Southern District of New York and therefore the case is now closed.
