US court rules failure to report 483s can mislead investors

The ruling partly overturns the 2010 rejection of a lawsuit that alleged KV mislead investors by failing to inform them of US Food and Drug Administration (FDA) Form 483s. In 2010 KV said it was innocent of securities fraud because 483s are just observations, not violations, but the appeal court disagreed.

“We reject KV's contention that the receipt of Form 483s can never render a company's statements about compliance with FDA regulations or cGMP false or misleading​”, a three-judge panel at the 8th Circuit Court of Appeals wrote.

In justifying the decision the panel cites several district rulings, including a case against Dendreon, but nothing from a federal appeals court. Javier Bleichmar, lead lawyer for the investors, told in-PharmaTechnologist.com this is because it is the first time a federal appeals court made this ruling.

Biopharma manufacturers should take note of the decision. “The implications for drugmakers are that Form 483s are not outside the reach of the federal securities laws and must be disclosed just like any other information if they include material facts​”, Bleichmar said.

In its ruling the appeal court judges said the “number, severity, and pervasiveness of objectionable conditions noted, as well as whether a company has failed to address or correct the deficiencies​” are factors that affect whether a 483 is considered material.

For KV the ruling means the revival of a case that last troubled it in 2010 when a district court judge dismissed the investor lawsuit. In its decision the appeals court chose to “affirm in part, reverse in part​” the decision of the district judge.

The appeals judges wrote: “We conclude the investors' complaint adequately set forth the reasons why KV's statements about its compliance with FDA regulations and cGMP were false, or at least misleading, at the time they were made​.”