Current and former officers and directors of dermatological medication maker Verrica Pharmaceuticals Inc. face a shareholder derivative action alleging the company concealed a “litany of issues” with a manufacturer’s facility that ultimately delayed U.S. Food and Drug Administration approval for a skin treatment. In a complaint filed Monday in federal court in Philadelphia, it is alleged that that company brass breached their fiduciary duties by concealing FDA findings about the manufacturing facility. When the company eventually acknowledged the regulatory scrutiny, those announcements pushed down trading prices for its shares.
Verrica makes a commercial product for treating a contagious skin disease caused by apox virus and started to seek FDA approval for its treatment in September 2019, contracting with the manufacturer to produce the therapy. It is alleged that the Pennsylvania-based company didn’t initially tell shareholders that the FDA investigated the manufacturer in May 2021 and made note of certain problems after inspecting its facility. When the company disclosed those FDA findings in September 2021, the announcement caused trading prices for Verrica shares to drop from $12 to $11. And in May 2022, the announcement of a second FDA letter sent the company’s trading prices down from about $5.50 to about $2, according to the suit. The investor accuses the Verrica officers and directors of leaving the company vulnerable to liability in connection with their handling of the FDA matters, noting the company faces a proposed investor class action over the same alleged misrepresentations.
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