Court says KV Pharma shareholders have every right to sue

Problems just never seem to end for KV Pharmaceutical ($KV.A), the St. Louis drugmaker that for several years now has been trying to regain its footing after the FDA smacked it with a consent decree over its self-made manufacturing debacle.

This time its trouble tracks to the failure to be upfront in financial filings with shareholders about the snafus. An appeals court this week reversed a lower court, and reinstated the right of shareholders to sue. Investors sued KV shortly after its December 2008 announcement that it was suspending production. The appeals court noted that when the first suit was filed, and later rejected in 2010, CEO Marc Hermelin had yet to plead guilty to violating drug labeling laws, Bloomberg reports. The suit alleges that the company was having problems as early as 2004 but didn't let on until it stopped production.

The company has been operating under a consent since 2009 after the FDA discovered that it was producing oversized morphine tablets, some which contained double doses of the API. KV initiated a recall but hid from the FDA the fact that the problems extended to two other drugs. Of course, when that came to light, the FDA reacted severely. Eventually its generic subsidiary, ETHEX, pleaded guilty to felony charges, paid nearly $26 million in fines and had to be closed. The company is again producing some products but continues to struggle.

In regard to the most recent decision, the company told Bloomberg that it "does not comment on legal matters." Seems that is what got it into trouble in the first place.

- read the Bloomberg story

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