Shares in MannKind Corp have taken a hit following the initiation of a lawsuit filed by its former senior director for regulatory affairs which claims the firm has suppressed clinical information about its potential inhaled insulin product Afrezza.
The firm's stock fell 11% to close at $5.51 yesterday as reports came through that John Arditi is accusing MannKind of covering up potential fraud in clinical trials for Afrezza. The claim forms the basis of his wrongful termination suit filed in September.
The company has disclosed in a regulatory filing that Mr Arditi alleges that MannKind fired him "in retaliation for his purported reporting of alleged unlawful practices in connection with our clinical trials". It has been claimed by Mr Arditi that fraudulent data was gathered at trial sites in Russia and Bulgaria and not all study materials have been submitted to US Food and Drug Administration for Afrezza, which MannKind resubmitted in July after the agency rejected the therapy in March.
MannKind's filing to the US Securities Exchange Commission notes that before Mr Arditi filed his complaint, "we had completed an internal investigation and retained an independent outside firm to conduct an extensive external investigation". Neither probe found "any basis for his claims", the firm said, adding that "we believe the allegations in the complaint are without merit and we intend to defend against them vigorously".
Accusations 'very difficult to believe'
Rodman & Renshaw analyst Simos Simeonidis told PharmaTimes World News that "markets don't like such new risk and uncertainty", hence the stock fall. He added that "there's always two sides to a story, but I wouldn't be surprised if this ends up being a case of a disgruntled employee trying to get back at the company who fired him".
Mr Simeonidis went on to say that in order to accept these "very serious accusations, one has to believe that fraud was willingly committed by people at the highest levels of management at MannKind, which, having known the senior management members at the company for years, I personally find very difficult to believe".
The FDA is due to give its verdict on Afrezza by December 29 but some observers feel the decision may be put back while Mr Arditi's claims are examined.