Boston, MA 03/05/2014 (wallstreetpr) – Immunomedics, Inc. (NASDAQ:IMMU) is facing class action suits on account of a broken agreement. Investors are suing the company alleging that it did not disclose the full extent of issues arising from the termination of an agreement.
The Agreement:
Immunomedics, Inc. (NASDAQ:IMMU) had entered into a License and Collaboration agreement with Nycomed GmbH in July, 2008 to develop, manufacture and commercialize Veltuzumab, a highly advanced drug developed by Immunomedics. The drug is a monoclonal antibody being developed for the treatment of all non cancer indications. Takeda Pharmaceutical Company took over Nycomed GmbH in September, 2011. In 2013, there arose a dispute between the two companies as Immunomedics was not satisfied with the progress in the development of the drug. The company notified Takeda-Nycomed in May, 2013 that it was in material breach of the agreement and the agreement would terminate if corrective measures were not taken. However, these facts were kept hidden from the investors and the company continued to make positive statements about the development work. Finally, Immunomedics, Inc. (NASDAQ:IMMU) announced the termination of the agreement on October 9, 2013.
The Non-Disclosure:
As Takeda-Nycomed was responsible for the development including clinical trials as well as regulatory approval for Veltuzumab, the development work stopped. The share prices of Immunomedics took a fall and many investors lost money. The class action suit alleges that investors should have been informed about the issues between the two companies. Immunomedics, Inc. (NASDAQ:IMMU) did not do so, instead, its management continued to paint a rosy picture right up to the termination of the agreement. As such these officials were in breach of some provisions of the Securities Exchange Act of 1934.
Several legal firms have announced class action suits against the company. It has recorded a good increase in revenues for the second quarter of fiscal 2014 on account of higher sales of LeukoScan in Europe as well as higher research and development revenues. However, clinical trial costs have also increased. Immunomedics, Inc. (NASDAQ:IMMU) is also incurring higher legal expenses on account of the arbitration proceedings with Takeda-Nycomed.
