UNITED STATES DISTRICT COURT SOUTHERN DISTRICT ...securities.stanford.edu/filings-documents/1051/CPRX00_01/...2013/10/25 · throughout this report. 25. On October 15, 2013 the company

Case 1:13-cv-23878-UU Document 1 Entered on FLSD Docket 10/25/2013 Page 1 of 20

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Case No. -Civ- Judge: Magistrate Judge:

ATUL KAMAR SOOD, INDIVIDUALLY AND ON CASE No.: BEHALF OF ALL OTHERS SIMILARLY SITUATED,

CLASS ACTION COMPLAINT Plaintiff, FOR VIOLATIONS OF THE

vs. FEDERAL SECURITIES LAWS

CATALYST PHARMACEUTICAL PARTNERS INC., PATRICK J. MCENANY, HURBERT E. JURY TRIAL DEMANDED HUCKEL,., and STEVEN R. MILLER

Defendants.


Plaintiff Atul Kamar Sood, individually and on behalf of all other persons similarly

situated, by plaintiff s undersigned attorneys, for plaintiff's complaint against defendants, alleges

the following based upon personal knowledge as to himself and his own acts, and upon

information and belief as to all other matters, based on the investigation conducted by and

through plaintiff's attorneys, which included, among other things, a review of Securities and

Exchange Commission ("SEC") filings by Catalyst Pharmaceutical Partners ("Catalyst" or the

"Company"), as well as media reports about the Company. Plaintiff believes that substantial

evidentiary support will exist for the allegations set forth herein after a reasonable opportunity

for discovery.

NATURE OF THE ACTION

1. This is a federal securities class action on behalf of a class consisting of all

persons other than defendants who purchased Catalyst securities between October 31, 2012 and

October 18, 2013, inclusive (the "Class Period"), seeking to recover damages caused by

defendants' violations of the federal securities laws and to pursue remedies under Sections 10(b)

and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 against

the Company and certain of its officers and directors.

2. Catalyst develops novel prescription drugs targeting rare (called "orphan")

neuromuscular and neurological diseases and disorders. Catalyst has three pharmaceutical

products in development.

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3. One of the drugs Catalyst has claimed to be developing and marketing is Firdapse,

a trade name for a chemical entity 3,4 -DAP. Catalyst claims that Firdapse will be used to treat a

rare but very serious disease, Lambert-Eaton Myasthenic Syndrome ("LEMS").

4. During the Class Period, Catalyst has claimed that it is engaged in a Phase III

Trial for Firdapse. Satisfactory completion of Phase III trials is the last step before seeking the

FDA's approval to market and sell a drug.

5. Throughout the Class Period, however, one of Catalyst’s competitors – a private

pharmaceutical company called Jacobus Pharmaceutical Company – has already been

manufacturing a drug biologically equivalent to Firedapse, and providing it to patients with

LEMS, free of charge, through a compassionate use program. Indeed, Jacobus has been doing so

for decades.

6. On October 18, 2013, an article in The Street entitled “ Catalyst Pharma: Orphan

Drug Poseur, Profiteer” was released. The article showed that Catalyst’s new drug Firdrapse was

the same drug that Jacobus had already been manufacturing and providing in the U.S. for at least

twenty years.

7. Between October 18 and the next trading day, October 21, Catalyst’s stock price

fell by 25% to close at $1.50, damaging investors.

JURISDICTION AND VENUE

8. Jurisdiction is conferred by §27 of the Exchange Act. The claims asserted herein

arise under §§10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. This

Court has jurisdiction over the subject matter of this action under 28 U.S.C. §1331 and §27 of the

Exchange Act.

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9. Venue is proper in this District pursuant to §27 of the Exchange Act and 28

U.S.C. §1391(b) as the Company conducts business in this district.

10. In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

PARTIES

11. Plaintiff, as set forth in the attached certification, purchased Catalyst securities at

artificially inflated prices during the Class Period and has been damaged upon the revelation of

the alleged corrective disclosures.

12. Defendant Catalyst is a Coral Gates, Florida headquartered company located at

355 Alhambra Circle Suite 1500 Coral Gates, FL 33134. The common stock is traded on the

NASDAQ Stock Market ("NASDAQ") under the ticker symbol "CPRX."

13. Defendant Patrick J. McEnany ("McEnany") is the Company’s co-founder, CEO

and President.

14. Defendant Dr. Hubert E. Huckel M.D. ("Huckel") is the Company’s co-founder

and one of its directors.

15. Defendant Steven R. Miller Ph. D. ("Miller") is the company’s COO and CSO.

16. The defendants referenced above in ¶¶ 13-15 are sometimes referred to herein as

the "Individual Defendants."

DEFENDANTS' WRONGDOING

Background

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17. Catalyst is a specialty pharmaceutical company which develops and

commercializes drugs treating orphan (rare) neuromuscular and neurological diseases.

18. Lambert-Eaton Myasthenic Syndrome (“LEMS”) is an extremely serious disase

which is also extremely rare, afflicting about 3.4 persons per million, and about one to two

thousand patients in the United States.

19. FDA rules permit so-called “compassionate use” – use of a drug that has not been

approved by the FDA outside of clinical trials. A patient may be given drugs under a

compassionate use program if the patient may benefit from the treatment, the therapy can be

given safely outside the clinical trial setting, no other alternative therapy is available, and the

drug developer agrees to provide access to the drug.

20. Jacobus is a tiny private pharmaceutical company in New Jersey, with only

dozens of employees, and only 35 as of 2009. Jacobus has been manufacturing 3,4 DAP and

providing it to patients through a compassionate use program for more than two decades.

Defendants Make Materially False Statements

21. On October 31, 2012the Company issued a press release announcing that it has

entered into a strategic collaboration with BioMarin Pharma (“BioMarin”) for the rights to

Firdapse in North America, which quoted Defendant McEnany as saying:

As part of this arrangement, we are gaining access to a late-stage U.S. orphan drug targeting LEMS, a disease of the central nervous system for which there is not currently an effective treatment approved in the United States. Our existing product candidates are focused on addiction and central nervous system orphan indications like Infantile Spasms/West Syndrome and Tourette’s Disorder, and adding FirdapseTM is consistent with our product development strategy. The relationship with BioMarin is exciting and strategically important, as it provides Catalyst with another orphan drug candidate and near-term funding towards the completion of the currently underway Phase III trial for FirdapseTM.

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22. On February 14, 2013 the Company issued another press release touting Firdapse,

stating in relevant part:

In October 2012, Catalyst acquired the North American rights to Firdapse, a proprietary form of amifampridine phosphate (3-4 diaminopyridine or 3-4 DAP), from BioMarin Pharmaceutical Inc. (“BioMarin”). Firdapse was approved in December 2009 by the European Medicines Agency for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS), a rare and sometimes fatal autoimmune disease characterized by muscle weakness. Firdapse has been granted orphan drug designation by the U.S. Food & Drug Administration, (FDA) for the treatment of LEMS, making the product eligible to obtain seven-year marketing exclusivity, if Catalyst is the first pharmaceutical company to obtain approval of an NDA for its formulation of amifampridine.

23. On March 27, 2013 the Company issued another press release which stated in

relevant part:

Catalyst Pharmaceutical Partners, Inc. (Nasdaq: CPRX), a specialty pharmaceutical company focused on the development and commercialization of novel prescription drugs targeting rare (orphan) neuromuscular and neurological diseases and disorders, announced today that, on March 25, 2013, the independent Data Monitoring Committee (DMC) overseeing the Company’s ongoing pivotal Phase III clinical trial in the United States and Europe evaluating FirdapseTM for the treatment of Lambert-Easton Myasthenic Syndrome (LEMS) recommended that the Company continue the trial as planned based on the committee’s review of safety and clinical data from the trial.

The DMC is a group of experts responsible for the independent review of accumulated clinical safety and efficacy data obtained in our clinical trial, in order to safeguard the interests and safety of participants and future patients. The DMC considers study-specific data, as well as relevant background knowledge about the disease, test agent or patient population under study.

The FirdapseTM Phase III clinical trial is designed as a randomized, double-blind, placebo-controlled, discontinuation trial enrolling 30 patients diagnosed with LEMS at sites in the U.S. and Europe. Catalyst anticipates that it will be adding up to 20 additional sites in the U.S., Europe, Canada and South America. Catalyst expects to complete enrollment in the trial by the end of the fourth quarter of 2013 and to announce top line data from the trial during the second quarter of 2014.

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24. On April 1, 2013 the company issued its yearly 10-K. In it they discussed

Firdapse and stated that it is interchable and is the bioequivilant of a 3,4-DAP or DAP. The 10-K

stated in relevant part:

FirdapseTM is Catalyst’s and BioMarin’s (depending on market region) registered trade name for amifampridine phosphate tablets. “Amifampridine” is the WHO (World Health Organization) registered INN (International Nonproprietary Name) for the chemical entity, 3,4-diaminopyridine (3,4-DAP or DAP) and its salts. In many cases, researchers have used the “free base” of this drug, 3,4- diaminopyridine, rather than phosphate salt. Amifampridine and amifampridine phosphate are bioequivalent and can be used interchangeably. We will refer to our drug by its trade name (FirdapseTM), the INN (amifampridine phosphate), or both throughout this report.

25. On October 15, 2013 the company issued a press release and 8-K filing. In it they

discussed Firdapse and its approval to continue Phase III testing:

Catalyst Pharmaceutical Partners, Inc. (Nasdaq: CPRX), a specialty pharmaceutical company focused on the development and commercialization of novel prescription drugs targeting rare (orphan) neuromuscular and neurological diseases and disorders, announced today that, at a recently held meeting, the independent Data Monitoring Committee (DMC) overseeing the Company’s ongoing pivotal Phase III clinical trial in the United States and Europe evaluating FirdapseTM for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS) recommended that the Company continue the trial as planned based on the committee’s review of safety and clinical data from the trial.

The DMC is a group of experts responsible for the independent review of accumulated, unblinded clinical safety and efficacy data obtained in the Company’s clinical trial, in order to safeguard the interests and safety of participants and future patients. The DMC considers study-specific data, as well as relevant background knowledge about the disease, test agent or patient population under study.

The FirdapseTM Phase III clinical trial is designed as a randomized, double-blind, placebo-controlled, discontinuation trial enrolling 36 patients diagnosed with LEMS at sites in the U.S. and Europe. To accomplish this, the Company, in addition to the 7 active sites at the time of acquisition, has initiated 12 additional sites and expects to initiate shortly an additional 6 sites in the U.S., Europe, Canada and South America. The Company expects to complete enrollment in the

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trial about the end of the fourth quarter of 2013 and to announce top line data from the trial during the second quarter of 2014.

26. In none of the above releases did Catalyst mention Jacobus Pharmaceuticals, a

company that has been giving the same drug to those suffering from LEMS, for free, for the last

twenty years in the United States.

THE TRUTH MATERIALIZES CAUSING PLAINTIFF’S LOSSES

27. On October 18, 2013, The Street issued an article entitled “Catalyst Pharma:

Orphan Drug Poseur, Profiteer” which stated in relevant part:

CORAL GABLES, Fla. (TheStreet) -- Catalyst Pharmaceuticals Partners (CPRX_) is considered an orphan drug stock because that's the story management spins. Dig deeper into Catalyst and you'll discover allegations of profiteering off a small group of vulnerable, sick patients and a ton of clinical and regulatory risk.

***

The company's lead drug candidate is Firdapse for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS) -- a rare, neuromuscular disease which causes progressive muscle weakness. Untreated, LEMS patients -- usually in their 40s or 50s -- lose mobility and suffer other complications which can lead to shortened life expectancy. About half of LEMS diagnoses are associated with small cell lung cancer, the rest from autoimmune disease.

There are only a few thousand LEMS patients in the U.S. so the disease qualifies for orphan status. Firdapse is already approved in Europe where it is marketed by Biomarin Pharmaceuticals (BMRN _j Catalyst licensed Firdapse from Biomarin for the U.S. market. The drug is not FDA approved here, so Catalyst is conducting a phase III study in LEMS patients (Biomarin started the study, Catalyst took it over) with top-line results expected in the middle of 2014. If the Firdapse study is positive (high odds, see Europe), Catalyst plans to submit the drug for U.S. approval in 2015 and start selling it in 2016. The company has not disclosed Firdapse pricing, but some analysts guesstimate a price tag exceeding $60,000 per year. Even with "moderate" orphan drug pricing, Firdapse could generate $200-500 million in peak sales, the company claims. [This includes treating another 2,000 patients or so with rare diseases similar to LEMS.]

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This "We're an orphan drug company, too!" pitch that Catalyst makes to investors has been effective. The stock's performance this year is stellar:

[...]

There is another, troubling side to the Catalyst story.

For the past 20 years, Jacobus Pharmaceuticals, a small, private, family-owned pharmaceutical company in New Jersey, has provided LEMS patients in the U.S. (and some in Europe) with an effective drug known as 3,4-Dap free of charge.

[...]

One more thing: 3,4-Dap is Firdapse. The two drugs are equivalent. The same. Even Catalyst acknowledges that 3,4-Dap is an effective treatment for LEMS.

In other words, Catalyst is developing Firdapse for LEMS and will likely charge U.S. patients more than $60,000 per year even though the same drug is already available to U.S LEMS patients for free.

You can understand why Catalyst doesn't like to discuss this part of the story.

I had the chance to speak with David and Laura Jacobus, the father-daughter team who run Jacobus Pharmaceuticals. The company was founded by David Jacobus in 1977. Today, it sells a couple of drugs in addition to manufacturing and supplying 3,4-Dap to LEMS patients through numerous compassionate use programs set up at leading academic medical centers like Duke, Cleveland Clinic and the Mayo Clinic.

3,4-Dap has been around for decades but has never been formally reviewed or approved by the FDA. As Laura Jacobus tells the story, 20-odd years ago, the Muscular Dystrophy Association approached her father about manufacturing 3,4- Dap. At that time, doctors were interested in studying 3,4-Dap as a promising treatment for LEMS but a reliable, high-quality supply of the drug was unavailable.

Jacobus agreed to manufacture 3,4-Dap at the MDA's request. In the ensuing decades, the company has built an efficient and trusted relationship with LEMS patients and their doctors. LEMS patients in need of treatment are referred to medical centers with investigator-sponsored IND programs, also known as expanded access or compassionate use programs. [A couple of examples can be found here and here.] Paperwork is filled out and submitted to the FDA, which grants the doctor permission to treat the LEMS patient with 3,4-Dap .

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Once FDA approval is granted, Jacobus is notified and 3,4-Dap is shipped to the doctor free of charge.

"We have a great relationship with the FDA. Before he retired, Rusty Katz used to call me personally to give the okay for these compassionate use cases," said David Jacobus. [Katz was the head of the FDA division which reviews and regulates neurologic drugs.]

***

"Firdapse is not a new compound. It's the same drug we make. What Catalyst is doing is not the same as a company profiting from a new invention. What Catalyst is doing is making money off LEMS patients. They don't want to help 21 LEMS patients, they just want to make money. If I worked for Catalyst, I wouldn't be able to sleep at night," she says. Jacobus is working to stop Catalyst from gaining FDA approval for Firdapse. After years of supplying 3,4-Dap for free through compassionate use programs, Jacobus decided to conduct its own clinical trial with the intent of getting the drug formally approved by the FDA.

The Jacobus pivotal study of 3,4-Dap in LEMS patients is underway, competing directly with Catalyst’s Firedapse study.

Laura Jacobus wouldn't disclose how many patients are enrolled to date but said enrollment is going "very well" and the study is "getting close to the end." The company's long relationship with U.S. doctors who treat LEMS patients has helped greatly, she added. [The Wikipedia entry for 3,4-Dap even encourages LEMS patients not to enroll in Catalyst's Firdapse study.]

28. The article goes on to say in relevant part:

I reached out to Catalyst CEO Patrick McEnany for a response to the criticisms leveled by David and Laura Jacobus. In particular, I wanted to know why Catalyst chose to take on the development of Firdapse in LEMS given the free supply of 3,4-Dap available for so long.

McEnany responded via email:

Catalyst is seeking to develop this drug in order to make an FDA approved treatment available to all patients suffering from LEMS in a relatively short period of time. Catalyst recently acquired the development program and North American marketing rights for this drug. The development program was a phase III program that was well underway and was discussed with the FDA. Catalyst feels that we will be able to complete the development, seek FDA approval, and

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make an FDA approved therapy available to patients in a relatively short period of time, perhaps before 2016. Catalyst has observed that 3,4-Dap has been known to be effective in the treatment of LEMS for over 20 years and yet there is still no FDA approved version of this drug. Catalyst believes this is an opportunity to develop a new drug for an underserved population of patients.

Is there something different about Firdapse compared to the 3,4-Dap made by Jacobus that will benefit LEMS patients?

McEnany:

Firdapse contains the phosphate salt of 3,4-Dap. This pharmaceutical drug substance is more stable than the free base form of the 3,4-Dap that is available from Jacobus. Catalyst believes that Firdapse will have superior stability at room temperature which will provide patients with the assurance that their drug has the correct potency and purity throughout its shelf life, even when stored in a medicine cabinet or carried on the patients person for an extended period of time. Catalyst's Firdapse tablets, and its active ingredient, are produced on a commercial scale using validated processes and under all requirements of GMPs (this is a requirement for phase III clinical trial medications.

I really wanted to know what McEnany thought about being called a profiteer who doesn't care about the well being of LEMS patients. His response:

To state they [Jacobus] are giving it [3,4-Dap ] away for free doesn't fully describe the added burden placed on patients and their treating physicians and does not make it clear they are required under federal law to provide it for free under these circumstances. It is also stated above that the patient population is well served. First, because of the way in which the drug must be provided it is unlikely that all of the patients in need of the drug are in fact receiving it. The fact that Catalyst is able to recruit trial subjects in the United States in spite of Jacobus providing the drug for 20 years would seem to support this point. Second, the drug has not undergone the rigors of FDA review in which both the safety and efficacy of the drug would have to be demonstrated and specific dosing instructions provided. The current safety information and dosing instructions are likely insufficient, limiting the prescribing of this drug to a few experts in the use of the drug and the treatment of LEMS and is not suitable for broader use by the neuromuscular physician community. In short, these burdens limit access to patients that may need the drug, but do not have access to a physician willing to file an IND, or to become a clinical trial site. The best solution is clearly an FDA approved drug.

On that last point, Jacobus agrees, which is why the small drugmaker is in a race to get 3,4-Dap approved before Catalyst can do the same with Firdapse. This is a

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risk not widely recognized by investors who have bought Catalyst shares with the belief that it's an up-and-coming orphan drug developer.

29. On this news, Catalyst securities declined to $1.52 or 25% on October 21, 2013.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

30. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or

otherwise acquired Catalyst securities during the Class Period (the "Class"); and were damaged

thereby. Excluded from the Class are defendants herein, the officers and directors of the

Company, at all relevant times, members of their immediate families and their legal

representatives, heirs, successors or assigns and any entity in which defendants have or had a

controlling interest.

31. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Catalyst securities were actively traded on the

NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and

can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds

or thousands of members in the proposed Class. Record owners and other members of the Class

may be identified from records maintained by Catalyst or its transfer agent and may be notified

of the pendency of this action by mail, using the form of notice similar to that customarily used

in securities class actions.

32. Plaintiff’s claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of

federal law that is complained of herein.

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33. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

Plaintiff has no interests antagonistic to or in conflict with those of the Class.

34. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

. whether the federal securities laws were violated by defendants' acts as alleged herein;

• whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Catalyst;

• whether the Individual Defendants caused Catalyst to issue false and misleading financial statements during the Class Period;

• whether defendants acted knowingly or recklessly in 1ssumg false and misleading financial statements;

• whether the prices of Catalyst securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and

• whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

35. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

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36. Plaintiff will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:

• defendants made public misrepresentations or failed to disclose material facts during the Class Period;

. the omissions and misrepresentations were material;

~ Catalyst securities are traded in efficient markets;

• the Company's shares were liquid and traded with moderate to heavy volume during the Class Period;

~ the Company traded on the NASDAQ, and was covered by multiple analysts;

• the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and

• Plaintiff and members of the Class purchased and/or sold Catalyst securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.

37. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a

presumption of reliance upon the integrity of the market.

COUNT I

For Violations of §10(b) of the Exchange Act and Rule 10b-5 Against All Defendants

38. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

39. This Count is asserted against defendants and is based upon Section 10(b) of the

Exchange Act, 15 U.S.C. § 78j(b), and Rule lOb-5 promulgated thereunder by the SEC.

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40. During the Class Period, defendants engaged in a plan, scheme, conspiracy and

course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions,

practices and courses of business which operated as a fraud and deceit upon Plaintiff and the

other members of the Class; made various untrue statements of material facts and omitted to state

material facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading; and employed devices, schemes and artifices to

defraud in connection with the purchase and sale of securities. Such scheme was intended to,

and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and

other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of

Catalyst securities; and (iii) cause Plaintiff and other members of the Class to purchase Catalyst

securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan

and course of conduct, defendants, and each of them, took the actions set forth herein.

41. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of

the defendants participated directly or indirectly in the preparation and/or issuance of the

quarterly and annual reports, SEC filings, press releases and other statements and documents

described above, including statements made to securities analysts and the media that were

designed to influence the market for Catalyst securities. Such reports, filings, releases and

statements were materially false and misleading in that they failed to disclose material adverse

information and misrepresented the truth about Catalyst's finances and business prospects.

42. By virtue of their positions at Catalyst, defendants had actual knowledge of the

materially false and misleading statements and material omissions alleged herein and intended

thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, defendants

acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose

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such facts as would reveal the materially false and misleading nature of the statements made,

although such facts were readily available to defendants. Said acts and omissions of defendants

were committed willfully or with reckless disregard for the truth. In addition, each defendant

knew or recklessly disregarded that material facts were being misrepresented or omitted as

described above.

43. Information showing that defendants acted knowingly or with reckless disregard

or the truth is peculiarly within defendants' knowledge and control. As the senior managers

and/or directors of Catalyst, the Individual Defendants had knowledge of the details of Catalyst

internal affairs.

44. The Individual Defendants are liable both directly and indirectly for the wrongs

complained of herein. Because of their positions of control and authority, the Individual

Defendants were able to and did, directly or indirectly, control the content of the statements of

Catalyst. As officers and/or directors of a publicly-held company, the Individual Defendants had

a duty to disseminate timely, accurate, and truthful information with respect to Catalyst's

businesses, operations, future financial condition and future prospects. As a result of the

dissemination of the aforementioned false and misleading reports, releases and public statements,

the market price of Catalyst securities was artificially inflated throughout the Class Period. In

ignorance of the adverse facts concerning Catalyst's business and financial condition which were

concealed by defendants, Plaintiff and the other members of the Class purchased Catalyst

securities at artificially inflated prices and relied upon the price of the securities, the integrity of

the market for the securities and/or upon statements disseminated by defendants, and were

damaged thereby.

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45. During the Class Period, Catalyst securities were traded on an active and efficient

market. Plaintiff and the other members of the Class, relying on the materially false and

misleading statements described herein, which the defendants made, issued or caused to be

disseminated, or relying upon the integrity of the market, purchased shares of Catalyst securities

at prices artificially inflated by defendants' wrongful conduct. Had Plaintiff and the other

members of the Class known the truth, they would not have purchased said securities, or would

not have purchased them at the inflated prices that were paid. At the time of the purchases by

Plaintiff and the Class, the true value of Catalyst securities was substantially lower than the

prices paid by Plaintiff and the other members of the Class. The market price of Catalyst

securities declined sharply upon public disclosure of the facts alleged herein to the injury of

Plaintiff and Class members.

46. By reason of the conduct alleged herein, defendants knowingly or recklessly,

directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder.

47. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's securities during the Class Period, upon the disclosure that the

Company had been disseminating misrepresented financial statements to the investing public.

COUNT II

For Violations of §20(a) of the Exchange Act Against All Defendants

48. Plaintiff repeats and realleges each and every allegation contained in the foregoing

paragraphs as if fully set forth herein.

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49. During the Class Period, the Individual Defendants participated in the operation

and management of Catalyst, and conducted and participated, directly and indirectly, in the

conduct of Catalyst's business affairs. Because of their senior positions, they knew the adverse

non-public information about Catalyst's misstatement of income and expenses and false financial

statements.

50. As officers and/or directors of a publicly owned company, the Individual

Defendants had a duty to disseminate accurate and truthful information with respect to Catalyst's

financial condition and results of operations, and to correct promptly any public statements

issued by Catalyst which had become materially false or misleading.

51. Because of their positions of control and authority as senior officers, the

Individual Defendants were able to, and did, control the contents of the various reports, press

releases and public filings which Catalyst disseminated in the marketplace during the Class

Period concerning Catalyst's results of operations. Throughout the Class Period, the Individual

Defendants exercised their power and authority to cause Catalyst to engage in the wrongful acts

complained of herein. The Individual Defendants therefore, were "controlling persons" of

Catalyst within the meaning of Section 20(a) of the Exchange Act. In this capacity, they

participated in the unlawful conduct alleged which artificially inflated the market price of

Catalyst securities.

52. Each of the Individual Defendants, therefore, acted as a controlling person of

Catalyst. By reason of their senior management positions and/or being directors of Catalyst, each

of the Individual Defendants had the power to direct the actions of, and exercised the same to

cause, Catalyst to engage in the unlawful acts and conduct complained of herein. Each of the

Individual Defendants exercised control over the general operations of Catalyst and possessed

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the power to control the specific activities which comprise the primary violations about which

Plaintiff and the other members of the Class complain.

53. By reason of the above conduct, the Individual Defendants are liable pursuant to

Section 20(a) of the Echange Act for the violations committed by Catalyst.

PRAYER FOR RELIEF

WHEREFORE , Plaintiff prays for relief and judgment, as follows:

(a) Determining that this action is a proper class action, designating Plaintiff as

Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules

of Civil Procedure and Plaintiff’s counsel as Lead Counsel;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class

members against all Defendants, jointly and severally, for all damages sustained as a result of

Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred

in this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

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JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: October 24, 2013 Respectfully submitted,

THE ROSEN LAW FIRM, P.A.

/s/ Laurence M. Rosen Laurence M. Rosen, Esq, Fla. Bar # 0182877 275 Madison Avenue, 34th Floor New York, NY 10016 Phone: (212) 686-1060 Fax: (212) 202-3827

Counsel for Plaintiff

20

Documents

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT ...securities.stanford.edu/filings-documents/1051/CPRX00_01/...2013/10/25 · throughout this report. 25. On October 15, 2013 the company