Investor sues Alpha 1 over its hepatitis drug

May 27, 1994|By David Conn | David Conn,Sun Staff Writer

An investor yesterday filed a class-action lawsuit against Alpha 1 Biomedicals Inc., a Bethesda pharmaceutical company,

alleging the firm misled the public about the prospects for its most promising drug.

On April 28, when the bad news came out about the drug's effectiveness, Alpha 1's stock lost more than two-thirds of its value.

That day, the company released the long-awaited results of clinical trials for thymosin alpha 1, intended to treat hepatitis B. Before the stock market opened that day, Alpha 1 told the public that the so-called "Phase III" clinical test, the most extensive one conducted on the drug, showed thymosin alpha 1 was no more effective than a placebo in treating hepatitis B.

The news contradicted optimistic reports from various securities firms during the previous year. Yesterday's lawsuit, one of several that have been filed against Alpha 1, alleges that the company and its officers knew the partial results of the test at least since May 11, 1993, but misrepresented the prospects of the drug and failed to correct false statements made by others.

"Defendants failed to disclose this information to the investing public until April 28, 1994," according to the suit filed in U.S. District Court in Baltimore by an investor, Henry T. Cole, for himself and on behalf of others who bought Alpha 1 stock between May 11, 1993, and April 26, 1994.

Mr. Cole had purchased 2,000 shares of Alpha 1 stock at an average price of $11.94 a share.

On April 28 the stock fell to $2 a share, from $6.19. Yesterday it closed at $2.625, down 12.5 cents.

Vincent F. Simmon, Alpha 1's president and chief executive officer, said the suit was without merit.

He said because the clinical test was "double blind" -- neither the patients nor the independent testers knew who was receiving the drug or the placebo -- "it would not be possible for the company to know the results as of May [1993] but to withhold the results until April" this year.

He said the company never made a statement about the prospects for the trials. And he added that the lawsuit has taken out of context the statements made to securities analysts by the chief investigator in the clinical trial, who was not affiliated with Alpha 1.

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