Recro Pharma Inc. received final approval of a $1.4 million settlement to resolve a shareholder class action, which alleged its stock plunged more than 50% after informing its investors that the FDA declined to approve its experimental analgesic drug ‘meloxicam’ for sale and marketing in the U.S.
Although the settlement amount is small compared to the plaintiffs’ “forecasted” damages of $34 million, it is reasonable given weaknesses in the plaintiffs’ case, Judge Michael M. Baylson of the US District Court for the Eastern District of Pennsylvania said Thursday in a final order approving the agreement.
“Plaintiff’s counsel explained that they had run into various problems, primarily a confidential informant on whom plaintiffs were heavily relying turning out to be not completely truthful,” Baylson said.
“Although a low settlement in a case of this nature is highly unusual,” Baylson said, because there have been no objections to the settlement “no purpose would be served by rejecting” it.
Baylson, however, slashed the requested award of attorneys’ fees in half, granting $233,800 in fees to be divided between counsel for the plaintiffs, Pomerantz LLP and Kaskela Law LLC.
Baylson awarded expenses to be deducted from the settlement amount of $384,449, trimming $40,000 from the proposed settlement amount, and declined to grant service awards to the lead plaintiffs.
The attorneys’ fees and expenses will be deducted from the settlement fund.
The settlement class consists of all persons who acquired Recro securities between July 17, 2017, through May 23, 2018, and were allegedly damaged thereby.
The complaint alleged that the company misled investors about the market for IV meloxicam, and “misled investors to believe that, even though IV meloxicam was manufactured overseas, there was ‘oversight by our internal managers.’” In fact, the plaintiffs’ alleged, “Recro did not have a handle on the manufacturing process.”
Greenbaum Rowe Smith & Davis LLP and Troutman Pepper Hamilton Sanders LLP represented Recro.
The case is Alberici v. Recro Pharma Inc., 2022 BL 429405, E.D. Pa., No. 18-2279, final approval 12/1/22.