Rockwell Medical Inc. (Nasdaq: RMTI) has filed a countersuit against its former chief medical officer, alleging that he overstated his qualifications, breached a confidentiality agreement and made false and defamatory statements about the company to third parties.
Rockwell Medical brought its action against Dr. Richard C. Yocum in state court in Michigan, which it is based. It is seeking a restraining order, as well as injunctive relief and financial damages.
Rockwell Medical fired Yocum from his job as vice president of drug development and medical affairs in September 2011. As Sharesleuth previously reported, Yocum alleged in a wrongful-termination suit that he was ousted because he repeatedly complained to Robert L. Chioini, the company’s chairman and chief executive, about violations of Securities and Exchange Commission and Food and Drug Administration rules.
Among other things, Yocum alleged that certain press releases issued in 2010 and 2011 made it appear that clinical trials for a new product called Soluble Ferric Pyrophosphate were going better than they actually were.
Rockwell Medical makes and distributes dialysis products. It is conducting Phase III clinical trials of SFP, which is used to deliver water-soluble iron into the bloodstream during dialysis treatment. The iron helps combat anemia, a common side effect in patients with end-stage renal disease.
Rockwell Medical is hoping that the trials prove SFP is not only safe for patients, but effective in treating their underlying conditions. It says the product is aimed at a market worth $600 million a year in the United States and $1 billion a year globally.
Yocum alleged in his suit that Rockwell Medical:
–falsely claimed that the results of its earlier Phase IIb studies of SFP were positive, despite the fact that they failed to demonstrate that the treatment was effective.
– falsely claimed that the Phase IIb trials produced clear dosing data.
– falsely claimed that the company had an agreement with the FDA on the design of its Phase III clinical trials.
– proceeded with those trials despite unresolved differences with the FDA, without correcting its public statements and informing investors of those differences.
– announced an unrealistic date for bringing SFP to market, disregarding Yocum’s much longer timetable.
– failed to modify its Phase III trials to account for changes in FDA product labeling for erythropoiesis-stimulating agents, which are used to treat anemia and would likely be taken by all of the participants in the trials.
Rockwell Medical alleged in its filing last week that Yocum withheld vital information from management in early 2010 regarding the SFP program. It said that the “deliberate and negligent omission of data’’ was not discovered until months later, after considerable expense to the company.
Rockwell Medical also alleged that, at the time he was hired, Yocum made false and misleading representations about his experience and successes in dealing with the FDA on clinical programs.
In addition, Rockwell Medical said that he performed his duties in a fraudulent and incompetent manner. It said an investigation found that Yocum – who was based in San Diego rather than at company headquarters – did “little or no work, evading work and conducting private activities throughout each and every work day.’’
Finally, it said that in the final months of his employment, Yocum made false and defamatory statements about the company and its SFP program to third parties and investors, revealing confidential information.
Sharesleuth’s story on Yocum’s allegations was based entirely on his lawsuit and the company’s SEC filings.
Rockwell Medical said Yocum’s statements have harmed its reputation, hindered its business relationships and hurt its stock price, reducing its market capitalization by $50 million.
Rockwell Medical noted that soon after Yocum was fired, he began working for another pharmaceutical company, making significantly more in compensation and benefits than he received in his former job.