The board of directors of AcelRx Pharmaceuticals are subject to a new derivative suit as of Friday, according to a case that was filed in the Northern District Court of California. The allegations, brought by an investor on behalf of the company, is regarding breach of fiduciary duty and violations of the Securities and Exchange Act of 1934.
The plaintiffs alleged violations of the Securities and Exchange Act, which sets forth a responsibility for the directors and officers of a corporation to meet certain fiduciary duties to the shareholders of the company and the company itself. This responsibility is deepened in the case of pharmaceutical companies who must also meet the requirements of the Food and Drug Administration (FDA) regarding the marketing and packaging of their pharmaceutical products to prevent misbranding and to ensure that warning labels and restrictions on the use of the product are visible.
In 2018, the complaint said, AcelRx announced that the FDA had approved their main product, DSUVIA, for the management of acute pain. The plaintiff accuses the directors and officers of AxelRx of failing in their duties to review and prevent the drug from being marketed and announced in a manner that failed to comply with the FDA regulations.
This purported failure included giving great prominence of location and font size to the benefits of DSUVIA and giving a lesser prominence and font size to the limitations and risks of the product, which resulted in a warning letter and later administrative action against the company. Resolution of this issue allegedly resulted in waste of corporate assets which could have been prevented by implementing the proper internal controls prior to the marketing effort.
The plaintiff is suing for violations of the Section 14(a) of the Securities and Exchange Act, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and seeks contribution from the directors and officers in remediation of the costs of implementing corporate controls that should have originally present as well as rebranding with the proper format and layout. The plaintiff is represented by the Rosen Law Firm and the Brown Law Firm. No counsel has been entered to date for the defendants.
