As Delcath ($DCTH) reels from an FDA panel's 16-0 condemnation of its cancer-treating device, irked investors are lining up to sue, claiming the company withheld safety information about the technology to inflate its share price.
In a class action lawsuit filed in New York, plaintiffs say Delcath misrepresented or failed to disclose adverse events tied to the Melblez system, a drug-device combo designed to treat eye cancer that has spread to the liver. In April, an FDA advisory panel voted unanimously that the device's benefits did not outweigh its risks, citing a high rate of treatment-related mortality and delaying a final approval decision until Sept. 13.
The company's shares tanked more than 40% the next day, and the plaintiffs are looking for investors who bought Delcath stock between April 21, 2010, and May 2, 2013, to join in on the lawsuit.
Delcath said in a statement that it does not comment on pending litigation.
The company's device uses a system of filters and pumps to cordon off the liver and douse it with the chemotherapy melphalan, but the FDA took serious issue with those filters, saying they leaked the toxic therapy into the bloodstream and led to about 7% of patients dying of adverse events like liver failure and gastrointestinal bleeding after treatment.
Delcath wants to switch to a new filter it says is more effective, but the FDA wants another randomized clinical trial before allowing the swap, and that time-consuming process would likely postpone a reapplication long past Sept. 13.
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Editor's note: This story has been updated to include a statement from Delcath.