March 9, 2007
Charges Against Four Related to Collapse of Generic Drugmaker
Able Laboratories, Inc., which made generic drugs, collapsed in 2005 due to improper manufacturing procedures at its New Jersey facility, and now a former vice president and three former chemists at the company have been charged. The three chemists agreed to plead guilty to conspiracy to distribute adulterated and misbranded drugs, while Shashikant C Shah, who was Vice President of Quality Control, Quality Assurance and Regulatory Affairs, entered his plea to conspiracy to commit insider trading and selling the adulterated/misbranded drugs. The SEC also filed a civil insider trading case against Shah, and its Litigation Release (here) describes his trading:
The Commission's complaint alleges that on eight separate occasions from August 2003 through December 2004, Shah acquired an aggregate of 58,000 shares of Able's common stock by exercising employee stock options, and in each case sold the securities either immediately thereafter or within a few days. According to the complaint, at the time he engaged in these transactions, Shah was aware that Able was concealing from the U.S. Food and Drug Administration (FDA) problems with the quality control testing of Able products that resulted in the public release of drugs failing to meet established quality control standards. Shah reaped $909,000 in ill-gotten gains as a result of his unlawful trading. In May 2005, Able's common stock price fell more than $18 per share, or 75%, in one trading day, after Able discovered faulty testing practices of the type Shah had known about, and the company suspended all product shipments. Able's stock price continued to fall in the ensuing months, and the company eventually declared bankruptcy in July 2005, selling substantially all of its assets five months later.
Prior to its collapse, Able Laboratories employed 500 people and manufactured generic drugs to treat cardiac and psychiatric problems. (ph)
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