NRx Hit with Securities Class Action after COVID-19 Drug Fails to Secure FDA Approval

A complaint lodged against clinical-stage small molecule pharmaceutical company NRx and its CEO and CFO accuses the defendants of securities fraud in connection with a proposed COVID-19 drug. The Delaware lawsuit contends that the company misled investors about the drug’s viability, suggesting that it would receive U.S. Food and Drug Administration (FDA) approval, when in fact the NRx’s application contained data insufficient to warrant it.

The complaint explains that NRx is a Wilmington, Delaware company with common stock that trades on the Nasdaq Stock Market. It reportedly “develops various therapeutics for the treatment of central nervous system disorders and life-threatening pulmonary diseases,” including “ZYESAMI, an investigational pre-commercial drug for COVID-19 related respiratory failure.”

In June 2021, the company announced the filing of its drug application requesting emergency use authorization for Zyesami to treat critically ill COVID-19 patients. Over the summer, the company publicized two more press releases casting a positive light on the drug’s likelihood of success before the FDA.

The complaint also points to an earnings call, during which the company’s CEO stated, among other things, his belief that the results of an approval study demonstrated statistically significant improvement in patient survival, warranting the grant of emergency use approval.

After the FDA declined NRx’s application in November 2021, a company press release explained that the agency did so because the drug application contained insufficient data regarding Zyesami’s potential benefits and risks. After the news broke, NRx’s stock price declined $2.27 per share or 25.45%.

The plaintiff contends that the defendants knew of these deficiencies, and the corresponding fact that it was unlikely that the FDA would approve the application as presented, yet misled investors about the chance of success. The lawsuit seeks to certify a class of shareholders who suffered losses as a result of the alleged securities law anti-fraud provision violations.

The plaintiff and putative class are represented by Bielli & Klauder LLC and Pomerantz LLP.