Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 1 of 26
`
`
`
`FRANK A. MAGNANIMO
`MAGNANIMO & DEAN, LLP
`21031 Ventura Boulevard
`Suite 803
`Woodland Hills, CA 91364
`Telephone: (818) 305-3450
`Facsimile: (818) 305-3451
`Email: Frank@MagDeanLaw.com
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`CASE NO.:
`
`VERIFIED SHAREHOLDER
`DERIVATIVE COMPLAINT
`
`
`JURY TRIAL DEMANDED
`
`
`
`JOSELITO GONZALES,
`Derivatively on Behalf of Nominal
`Defendant ACELRX
`PHARMACEUTICALS, INC.,
`
` Plaintiff,
`
` v.
`
`ADRIAN ADAMS, RICHARD
`AFABLE, M.D., MARK G.
`EDWARDS, VINCENT J.
`ANGOTTI, STEPHEN J. HOFFMAN,
`M.D., PH.D., PAMELA P. PALMER,
`M.D., PH.D., MARINA
`BOZILENKO, HOWARD B. ROSEN
`and MARK WAN,
`
` Defendants,
`
`ACELRX PHARMACEUTICALS,
`INC.
`
` Nominal Defendant.
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 1
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 2 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`Plaintiff Joselito Gonzales (“Plaintiff”), on behalf of AcelRx Pharmaceuticals,
`
`Inc. (“AcelRx” or the “Company”), derivatively, alleges the following based upon
`
`personal knowledge as to himself and his own acts, and upon information and belief
`
`and investigation of counsel as to all other matters. That investigation included,
`
`among other things, a thorough review and analysis of public documents, court
`
`filings, press releases and news articles concerning AcelRx, and the other facts as set
`
`forth herein:
`
`NATURE OF THE ACTION
`
`1.
`
`This is a shareholder derivative action brought on behalf of and for the
`
`10
`
`benefit of AcelRx, against certain of its officers and/or directors named as defendants
`
`11
`
`herein seeking to remedy their breaches of fiduciary duties. Defendants’ actions have
`
`12
`
`caused, and will continue to cause, substantial financial harm and reputational
`
`13
`
`damage to AcelRx.
`
`14
`
`2.
`
`The Company is a specialty pharmaceutical company, focusing on the
`
`15
`
`development and commercialization of therapies for the treatment of acute pain. The
`
`16
`
`Company’s lead product candidate is DSUVIA, a 30 mcg sufentanil sublingual tablet
`
`17
`
`for the treatment of moderate-tosevere acute pain.
`
`18
`
`3.
`
`On November 2, 2018, the Company announced that the U.S. Food and
`
`19
`
`Drug Administration (“FDA”) had approved DSUVIA for the management of acute
`
`20
`
`pain in adults that is severe enough to require an opioid analgesic in certified
`
`21
`
`medically supervised healthcare settings, such as hospitals, surgical centers, and
`
`22
`
`emergency departments.
`
`23
`
`4.
`
`Throughout the Relevant Period (March 17, 2020 to the present),
`
`24
`
`Defendants caused the Company to make false and/or misleading statements and/or
`
`25
`
`failed to disclose that: (i) the Company had deficient disclosure controls and
`
`26
`
`procedures with respect to its marketing of DSUVIA; (ii) as a result, the Company
`
`27
`
`had been making false or misleading claims and representations about the risks and
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 2
`
`
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 3 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`efficacy of DSUVIA in certain advertisements and displays; (iii) the foregoing
`
`conduct subjected the Company to increased regulatory scrutiny and enforcement;
`
`and (iv) as a result, the Company’s public statements were materially false and
`
`misleading at all relevant times.
`
`5.
`
`On February 16, 2021, the Company disclosed that, on February 11,
`
`2021, it received a warning letter from the FDA concerning promotional claims for
`
`DSUVIA. Specifically, having “reviewed an ‘SDS Banner Ad’ (banner) (PM-US-
`
`DSV-0018) and a tabletop display (PMUS- DSV-0049) (display),” the FDA
`
`concluded that “[t]he promotional communications, the banner and display, make
`
`10
`
`false or misleading claims and representations about the risks and efficacy of
`
`11
`
`DSUVIA,” and “[t]hus . . . misbrand Dsuvia within the meaning of the Federal Food,
`
`12
`
`Drug and Cosmetic Act (FD&C Act) and make its distribution violative.” The
`
`13
`
`warning letter “request[ed] that AcelRx cease any violations of the FD&C Act” and
`
`14
`
`“submit a written response to th[e] letter within 15 days from the date of receipt.”
`
`15
`
`6.
`
`On this news, the Company’s stock price dropped $0.21 per share, or
`
`16
`
`8.37%, to close at $2.30 per share on February 16, 2021.
`
`17
`
`18
`
`JURISDICTION AND VENUE
`
`7.
`
`Pursuant to 28 U.S.C. § 1331 and section 27 of the Securities Exchange
`
`19
`
`Act of 1934 (the “Exchange Act”), this Court has jurisdiction over the claims asserted
`
`20
`
`herein for violation Section 10(b) of the Exchange Act, 15. U.S.C. § 78j(b), and
`
`21
`
`Section 21D of the Exchange Act, 15 U.S.C. § 78u-4(f). This Court has supplemental
`
`22
`
`jurisdiction over the remaining claims under 28 U.S.C. § 1367.
`
`23
`
`8.
`
`The Court has jurisdiction over each defendant because each defendant
`
`24
`
`is either a corporation that does sufficient business in California or is an individual
`
`25
`
`who has sufficient minimum contacts with California so as to render the exercise of
`
`26
`
`jurisdiction by the California courts permissible under traditional notions of fair play
`
`27
`
`and substantial justice.
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 3
`
`
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 4 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`9.
`
`Venue is proper in this District pursuant to 28 U.S.C. § 1391 because
`
`one or more of the Defendants either resides in or maintains executive offices in this
`
`District, including Nominal Defendant AcelRx, a substantial portion of the
`
`transactions and wrongs complained of herein – including Defendants’ primary
`
`participation in the wrongful acts detailed herein and aiding and abetting in violations
`
`of fiduciary duties owed to AcelRx – occurred in this District, and Defendants have
`
`received substantial compensation in this District by doing business here and
`
`engaging in numerous activities that had an effect in this District.
`
`10.
`
`In connection with the acts and conduct alleged herein, Defendants,
`
`10
`
`directly and indirectly, used the means and instrumentalities of interstate commerce,
`
`11
`
`including, but not limited to, the United States mails, interstate telephone
`
`12
`
`communications, and the facilities of the national securities exchanges and markets.
`
`13
`
`14
`
`Plaintiff
`
`PARTIES
`
`15
`
`11. Plaintiff Gonzales is a current AcelRx shareholder during the relevant
`
`16
`
`period. Plaintiff purchased 5,000 shares of AcelRx stock on October 11, 2018, and
`
`17
`
`6,000 shares of AcelRx stock on October 16, 2018. Plaintiff will continue to hold
`
`18
`
`AcelRx shares throughout the pendency of this action. Plaintiff will fairly and
`
`19
`
`adequately represent the interests of the shareholders in enforcing the rights of the
`
`20
`
`corporation.
`
`21
`
`Nominal Defendant
`
`22
`
`12. Nominal Defendant AcelRx is a Delaware corporation with principal
`
`23
`
`executive offices located at 25821 Industrial Boulevard, Suite 400, Hayward,
`
`24
`
`California 94545. The Company’s common stock trades in an efficient market on
`
`25
`
`the Nasdaq Global Market (“NASDAQ”) under the ticker symbol “ACRX.”
`
`26
`
`Director Defendants
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 4
`
`
`
`27
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 5 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`13. Defendant Adrian Adams (“Adams”) has served as the Company’s
`
`Chairman of the Board of Directors (the “Board”) since February 2013. Defendant
`
`Adams served on the Audit Committee prior to Defendant Howard B. Rosen’s
`
`appointment to the committee effective on June 16, 2020.
`
`14. Defendant Richard Afable, M.D. (“Afable”) has served as a Company
`
`director since December 2013.
`
`15. Defendant Mark G. Edwards (“Edwards”) has served as a Company
`
`director since September 2011. Defendant Edwards is a member of the Audit
`
`Committee.
`
`10
`
`16. Defendant Vincent J. Angotti (“Angotti”) has served as a Company
`
`11
`
`director and Chief Executive Officer (“CEO”) since March 2017.
`
`12
`
`17. Defendant Stephen J. Hoffman, M.D., Ph.D. (“Hoffman”) has served
`
`13
`
`as a Company director since February 2010. Defendant Hoffman is a member of the
`
`14
`
`Audit Committee.
`
`15
`
`18. Defendant Pamela P. Palmer, M.D., Ph.D. (“Palmer”) has served as a
`
`16
`
`Company director and Chief Medical Officer since she co-founded the Company in
`
`17
`
`July 2005.
`
`18
`
`19. Defendant Marina Bozilenko (“Bozilenko”) has served as a Company
`
`19
`
`director since March 2021.
`
`20
`
`20. Defendant Howard B. Rosen (“Rosen”) served as the Company’s CEO
`
`21
`
`from April 1, 2016 until March 5, 2017, as the Company’s interim CEO from April
`
`22
`
`1, 2015 until March 31, 2016, and has served as a Company director since 2008.
`
`23
`
`Defendant Rosen is a member of the Audit Committee.
`
`24
`
`21. Defendant Mark Wan (“Wan”) has served as our director since August
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 5
`
`
`
`25
`
`2006.
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 6 of 26
`
`
`
`22. Defendants Adams, Afable, Edwards, Angotti, Hoffman, Palmer,
`
`Bozilenko, Rosen and Wan are collectively referred to herein as “Director
`
`Defendants.”
`
`Officer Defendant
`
`23. Defendant Raffi Asadorian (“Asadorian”) served as the Company’s
`
`Chief Financial Officer at all relevant times.
`
`24. Defendants Asadorian is herein referred to as the “Officer Defendant.”
`
`25. The Director Defendants and Officer Defendant are collectively
`
`referred to herein as the “Defendants.”
`
`Audit Committee Charter
`
`26. Pursuant to the Company’s Audit Committee Charter, the purpose of
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`the Audit Committee is to assist the Board with oversight of the Company’s
`
`13
`
`accounting and financial reporting processes and the audit of the Company’s
`
`14
`
`financial statements.
`
`27. The Audit Committee Charter states in relevant part:
`
`The primary purpose of the Audit Committee (the “Committee”) of
`AcelRx Pharmaceuticals, Inc. (the “Company”) shall be to act on behalf
`of the Company’s Board of Directors (the “Board”) in fulfilling the
`Board’s oversight responsibilities with respect to the Company’s
`corporate accounting and financial reporting processes, systems of
`internal control over financial reporting and audits of financial
`statements, as well as the quality and integrity of the Company’s financial
`statements and reports and the qualifications, independence and
`performance of the registered public accounting firm or firms engaged as
`the Company’s independent outside auditors for the purpose of preparing
`or issuing an audit report or performing audit services (the “Auditors”),
`and the performance of the Company’s internal audit function as well as
`oversight of the Company’s healthcare and privacy programs. The
`operation of the Committee shall be subject to the Amended and Restated
`Bylaws of the Company as in effect from time to time and Section 141 of
`the Delaware General Corporation Law.
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 6
`
`
`
`
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 7 of 26
`
`***
`
`
`The Committee shall oversee the Company’s financial reporting process
`on behalf of the Board, shall have direct responsibility for the
`appointment, compensation, retention and oversight of the work of the
`Auditors and any other registered public accounting firm engaged for the
`purpose of performing other review or attest services for the Company.
`The Auditors and each such other registered public accounting firm shall
`report directly and be accountable to the Committee. The Committee’s
`functions and procedures should remain flexible to address changing
`circumstances most effectively. To implement the Committee’s purpose
`and policy, the Committee shall be charged with the following functions
`and processes with the understanding, however, that the Committee may
`supplement or (except as otherwise required by applicable laws or rules)
`deviate from these activities as appropriate under the circumstances:
`
`
`***
`
`
`Audited Financial Statement Review. To review, upon completion of the
`audit, the financial statements proposed to be included in the Company’s
`Annual Report on Form 10-K to be filed with the Securities and
`Exchange Commission (the “SEC”) and to recommend whether or not
`such financial statements should be so included.
`
`
`***
`
`
`Quarterly Results. To review with management and the Auditors, as
`appropriate, the results of the Auditors’ review of the Company’s
`quarterly financial statements, prior to public disclosure of quarterly
`financial information, if practicable, or filing with the SEC of the
`Company’s Quarterly Report on Form 10-Q, and any other matters
`required to be communicated to the Committee by the Auditors under
`standards of the PCAOB.
`
`Management’s Discussion and Analysis. To review with management
`and the Auditors, as appropriate, the Company’s disclosures contained
`under the caption “Management’s Discussion and Analysis of Financial
`Condition and Results of Operations” in its periodic reports to be filed
`with the SEC.
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 7
`
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 8 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`Press Releases. To review with management and the Auditors, as
`appropriate, earnings press releases, as well as the substance of financial
`information and earnings guidance provided to analysts and ratings
`agencies, which discussions may be general discussions of the type of
`information to be disclosed or the type of presentation to be made. The
`chairperson of the Committee may represent the entire Committee for
`purposes of this discussion.
`
`SUBSTANTIVE ALLEGATIONS
`
`28. The Company is a specialty pharmaceutical company that focuses on
`
`the development and commercialization of therapies for the treatment of acute pain.
`
`The Company’s lead product candidate is DSUVIA, a 30 mcg sufentanil sublingual
`
`tablet for the treatment of moderate-to severe acute pain. DSUVIA is a potent opioid
`
`painkiller that is of particular use in certain special circumstances where adult
`
`patients may not be able to swallow oral medication and where access to intravenous
`
`pain relief is not possible. The Company has marketed DSUVIA in advertisements
`
`as a one-step, simple to administer drug, accompanied by the slogan “TONGUE
`
`AND DONE” for
`
`the product, which refers
`
`to DSUVIA’s sublingual
`
`administration—i.e., a tablet of DSUVIA is placed beneath the tongue to dissolve.
`
`Marketing materials also touted that patients may retake the drug in one-hour
`
`intervals, without providing a maximum daily dosage.
`
`29. On November 2, 2018, the Company announced that the FDA had
`
`approved DSUVIA for the management of acute pain in adults that is severe enough
`
`to require an opioid analgesic in certified medically supervised healthcare settings,
`
`such as hospitals, surgical centers, and emergency departments.
`
`
`Materially False and Misleading Statements
`
`30. On March 16, 2020, the Company filed an annual report on Form 10-K
`
`25
`
`with the SEC (the “2019 Form 10-K”). The 2019 Form 10-K touted the Company’s
`
`26
`
`sales and marketing practices for DSUVIA, representing, inter alia, that the
`
`27
`
`Company has (i) “created and deployed a focused scientific support team to gather a
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 8
`
`
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 9 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`detailed understanding of individual emergency room and hospital needs in order to
`
`present DSUVIA effectively”; (ii) “increased awareness of the clinical profile of
`
`sublingual administration of sufentanil through publication of our clinical data”; (iii)
`
`“engaged appropriate Advisory Boards that include representative emergency room
`
`physicians, anesthesiologists, surgeons, nurses, pharmacy and therapeutics, or P&T,
`
`committee members and other related experts to provide us with input on appropriate
`
`commercial positioning for DSUVIA for each of these key audiences”; (iv) “built a
`
`sales and marketing organization that can define appropriate segmentation and
`
`positioning strategies and tactics for DSUVIA”; and (v) “established DSUVIA on
`
`10
`
`hospital and ambulatory surgery center formularies through deployment of an
`
`11
`
`experienced team to explain the clinical and health economic attributes of DSUVIA.”
`
`12
`
`31. The 2019 Form 10-K also reported that the Company “may adjust [its]
`
`13
`
`commercialization plan” by, among other things, “continuing to build and
`
`14
`
`progressively deploy a high-quality, customer-focused and experienced sales
`
`15
`
`organization in the United States dedicated to bringing innovative, highly valued
`
`16
`
`healthcare solutions to patients, payers and healthcare providers,” as needed, and by
`
`17
`
`“continuing to establish DSUVIA as a suitable choice for moderate to-severe acute
`
`18
`
`pain in certified medically supervised settings.”
`
`19
`
`32. Further, the 2019 Form 10-K touted that the Company “ha[s] carried
`
`20
`
`out an evaluation, under the supervision, and with the participation, of management
`
`21
`
`including our principal executive officer and principal financial officer, of our
`
`22
`
`disclosure controls and procedures . . . as of the end of the period covered by” the
`
`23
`
`2019 Form 10-K, and that, “[b]ased on their evaluation, our principal executive
`
`24
`
`officer and principal financial officer concluded that . . . our disclosure controls and
`
`25
`
`procedures were effective as of December 31, 2019.”
`
`26
`
`33. Appended as exhibits to the 2019 10-K were signed certifications
`
`27
`
`pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”), wherein Defendants Agnotti
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
` 9
`
`
`
`28
`
`
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 10 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`and Asadorian certified that “[t]he [2019 Form 10-K] fully complies with the
`
`requirements of Section 13(a) or Section 15(d) of the Exchange Act” and that “[t]he
`
`information contained in the [2019 Form 10-K] fairly presents, in all material
`
`respects, the financial condition and results of operations of the Company.” Further,
`
`Defendants Adams, Palmer, Edwards, Hoffman, Afable, Rosen and Wan signed the
`
`2019 Form 10-K.
`
`34. On May 11, 2020, the Company filed a quarterly report on Form 10-Q
`
`with the SEC, reporting the Company’s financial and operating results for the quarter
`
`ended March 31, 2020 (the “1Q20 Form 10-Q”). The 1Q20 Form 10-Q contained
`
`10
`
`substantively the same statements as referenced in ¶ 32, touting the effectiveness of
`
`11
`
`the Company’s disclosure controls and procedures for the period covered by the
`
`12
`
`report.
`
`13
`
`35. Appended as exhibits to the 1Q20 Form 10-Q were substantively the
`
`14
`
`same SOX certifications as referenced in ¶ 33, signed by Defendants Agnotti and
`
`15
`
`Asadorian.
`
`16
`
`36. On August 10, 2020, the Company filed a quarterly report on Form 10-
`
`17
`
`Q with the SEC, reporting the Company’s financial and operating results for the
`
`18
`
`quarter ended June 30, 2020 (the “2Q20 Form 10-Q”). The 2Q20 Form 10-Q
`
`19
`
`contained substantively the same statements as referenced in ¶ 32, touting the
`
`20
`
`effectiveness of the Company’s disclosure controls and procedures for the period
`
`21
`
`covered by the report.
`
`22
`
`37. Appended as exhibits to the 2Q20 Form 10-Q were substantively the
`
`23
`
`same SOX certifications as referenced in ¶ 33, signed by Defendants Agnotti and
`
`24
`
`Asadorian.
`
`25
`
`38. On November 5, 2020, the Company filed a quarterly report on Form
`
`26
`
`10-Q with the SEC, reporting the Company’s financial and operating results for the
`
`27
`
`quarter ended September 30, 2020 (the “3Q20 Form 10-Q”). The 3Q20 Form 10-Q
`
`28
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`10
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 11 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`contained substantively the same statements as referenced in ¶ 32, touting the
`
`effectiveness of the Company’s disclosure controls and procedures for the period
`
`covered by the report.
`
`39. Appended as exhibits to the 3Q20 Form 10-Q were substantively the
`
`same SOX certifications as referenced in ¶ 33, signed by Defendants Agnotti and
`
`Asadorian.
`
`40. The statements referenced in ¶¶ 30-39 were materially false and
`
`misleading because Defendants caused the Company to make false and/or misleading
`
`statements and/or failed to disclose that: (i) the Company had deficient disclosure
`
`10
`
`controls and procedures with respect to its marketing of DSUVIA; (ii) as a result, the
`
`11
`
`Company had been making false or misleading claims and representations about the
`
`12
`
`risks and efficacy of DSUVIA in certain advertisements and displays; (iii) the
`
`13
`
`foregoing conduct subjected the Company to increased regulatory scrutiny and
`
`14
`
`enforcement; and (iv) as a result, the Company’s public statements were materially
`
`15
`
`false and misleading at all relevant times.
`
`16
`
`17
`
`THE TRUTH EMERGES
`
`41. On February 16, 2021, the Company filed a current report on Form 8-
`
`18
`
`K with the SEC, disclosing that, on February 11, 2021, the Company received a
`
`19
`
`warning letter from the FDA concerning promotional claims for DSUVIA. The
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Form 8-K stated:
`
`On February 11, 2021, AcelRx . . . received a warning letter from the
`Office of Prescription Drug Promotion (“OPDP”) of the [FDA] (the
`“Letter”) relating to a banner advertisement the Company submitted to
`the OPDP on December 6, 2019 (the “Banner Ad”), and a tabletop
`display the Company submitted on February 28, 2020, and resubmitted
`to the OPDP at its request on September 23, 2020 (the “Tabletop
`Display,” and together with the Banner Ad, the “Promotional Material”).
`
`The Company submitted the materials to the OPDP pursuant to the FDA
`requirement that sponsors submit all promotional materials to the FDA at
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`11
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 12 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`the time of their initial dissemination or publication. The FDA’s concerns
`identified in the Letter include its view that the Promotional Material
`makes misleading claims and representations about the risks and efficacy
`of DSUVIA® because the Promotional Material does not reveal facts that
`are material in light of the representations made . . . . [T]he Company has
`not used the Banner Ad since late 2019, nor used the table drape that is
`part of the Tabletop Display since November 2019; however, the
`Company plans to review its marketing materials to identify any potential
`revisions in light of the Letter. The Company intends to respond to the
`FDA within the timeframe requested in the Letter and seek guidance and
`clarification from the FDA on the concerns raised in the Letter. The Letter
`does not restrict the Company’s ability to manufacture or sell DSUVIA.
`The Company cannot give any assurances, however, that the FDA will
`be satisfied with its response to the Letter or that such response will
`resolve the issues identified in the Letter.
`
`42. The FDA warning letter advised that the agency “has reviewed an ‘SDS
`
`12
`
`Banner Ad’ (banner) (PM-US-DSV-0018) and a tabletop display (PM-US-DSV-
`
`13
`
`0049) (display) for DSUVIA (sufentanil) sublingual tablet, CII (Dsuvia) submitted
`
`14
`
`by AcelRx,” and that “[t]he promotional communications, the banner and display,
`
`15
`
`make false or misleading claims and representations about the risks and efficacy of
`
`16
`
`DSUVIA,” which “misbrand Dsuvia within the meaning of the Federal Food, Drug
`
`17
`
`and Cosmetic Act (FD&C Act) and make its distribution violative.”
`
`18
`
`43. The FDA warning letter noted the following deficiency with respect to
`
`19
`
`the banner and tabletop display at issue: “The banner includes the claim, ‘DSUVIA®
`
`20
`
`comes in one strength for acute pain. . . TONGUE AND DONE.’ (bolded emphasis
`
`21
`
`original; reference omitted) in conjunction with an image of the single-dose
`
`22
`
`applicator device. Similarly, the display prominently includes the claim ‘TONGUE
`
`23
`
`AND DONE’ (bolded emphasis original).” The FDA found that “[t]hese
`
`24
`
`presentations are misleading because they imply that the administration of Dsuvia
`
`25
`
`consists of a simple, one-step process, when this is not the case,” and that, “[i]n fact,
`
`26
`
`there are numerous administration steps outlined in the PI [the FDA-approved
`
`27
`
`28
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`12
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 13 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`product labeling], including a separate, distinct step to visually confirm tablet
`
`placement in the patient’s sublingual space of the mouth.”
`
`44. The FDA warning letter further advised that the banner at issue was
`
`deficient for stating: “Minimum redosing interval 1 hour” and “Average redosing
`
`interval 3 hours*… *Shown over a 12-hour period in the pivotal trial” (emphases
`
`and alteration in original), because they “create a misleading impression about the
`
`use of Dsuvia” by “omit[ting] . . . material information from the DOSING AND
`
`ADMINISTRATION section of the PI.” Specifically, the banner should have
`
`included the words “Do not exceed 12 tablets in 24 hours” because, “[b]y omitting
`
`10
`
`this material information about the maximum daily dosage, the banner creates a
`
`11
`
`misleading impression about the safe use of Dsuvia.” The FDA noted that “[t]hese
`
`12
`
`omissions are concerning from a public health perspective due to the serious risks
`
`13
`
`associated with overdose with Dsuvia, including respiratory depression and death,
`
`14
`
`that should be considered when prescribing the product.”
`
`15
`
`45.
`
`In addition, the FDA warning letter took issue with the banner’s claim
`
`16
`
`that “DSUVIA® comes in one strength for acute pain” because “the banner makes
`
`17
`
`representations about the indication and use of the drug but fails to adequately convey
`
`18
`
`material information regarding Dsuvia’s limitations of use, thereby creating a
`
`19
`
`misleading impression about the drug.”
`
`20
`
`46. The FDA warning letter also found that “unlike the benefit claims in the
`
`21
`
`banner, which utilized a color background and large font, the full indication with the
`
`22
`
`limitations of use are intermingled with risk information in a paragraph format in a
`
`23
`
`much smaller font size and a plain white background,” which were only accessible
`
`24
`
`to viewers by scrolling down the banner and, therefore, did “not mitigate the
`
`25
`
`misleading impression.”
`
`26
`
`47. The FDA warning letter also noted that the banner and tabletop display
`
`27
`
`at
`
`issue “fail
`
`to present
`
`information relating
`
`to
`
`the Boxed Warning,
`
`28
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`13
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 14 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`Contraindications, Warnings and Precautions, and Adverse Reactions for Dsuvia
`
`with a prominence and readability reasonably comparable with the presentation of
`
`information relating to the benefits of Dsuvia.” The FDA warning letter found that
`
`“benefit claims for Dsuvia are presented in conjunction with colorful graphics and
`
`large bolded headlines, with significant white space,” whereas “the risk information
`
`is relegated farther down in paragraph format with less prominence.” The FDA
`
`therefore concluded that “[b]y failing to adequately present the risks and benefits
`
`associated with Dsuvia, the banner and display create a misleading impression about
`
`the safe and effective use of the drug.”
`
`10
`
`48. The FDA warning letter also “request[ed] that AcelRx cease any
`
`11
`
`violations of the FD&C Act” and “submit a written response to th[e] letter within 15
`
`12
`
`days from the date of receipt.”
`
`13
`
`49. On this news, the Company’s stock price fell $0.21 per share, or 8.37%,
`
`14
`
`to close at $2.30 per share on February 16, 2021.
`
`15
`
`16
`
`DUTIES OF DEFENDANTS
`
`50. By reason of their positions as officers, directors, and/or fiduciaries
`
`17
`
`of the Company and because of their ability to control the business and corporate
`
`18
`
`affairs of the Company, Defendants owed the Company and its shareholders
`
`19
`
`fiduciary obligations of trust, loyalty, good faith and due care, and were and are
`
`20
`
`required to use their utmost ability to control and manage the Company in a fair,
`
`21
`
`just, honest, and equitable manner. Defendants were and are required to act in
`
`22
`
`furtherance of the best interests of the Company and its shareholders so as to benefit
`
`23
`
`all shareholders equally, and not in furtherance of their personal interest or benefit.
`
`24
`
`51. Each director and officer of the Company owes to the Company and
`
`25
`
`its shareholders the fiduciary duty to exercise good faith and diligence in the
`
`26
`
`administration of the affairs of the Company and in the use and preservation of its
`
`27
`
`property and assets, as well as the highest obligations of fair dealing. In addition,
`
`28
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`14
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 15 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`as officers and/or directors of a publicly held company, Defendants had a duty to
`
`promptly disseminate accurate and truthful information with regard to the
`
`Company’s operations, finances, financial condition, and present and future
`
`business prospects so that the market price of the Company’s stock would be based
`
`on truthful and accurate information.
`
`52. Defendants, because of their positions of control and authority as
`
`directors and/or officers of the Company, were able to and did, directly and/or
`
`indirectly, exercise control over the wrongful acts complained of herein, as well as
`
`the contents of the various public statements issued by the Company. Because of
`
`10
`
`their advisory, executive, managerial and directorial positions with the Company,
`
`11
`
`each of the Defendants had access to adverse non-public information about the
`
`12
`
`financial condition, operations, sales and marketing practices, and improper
`
`13
`
`representations of the Company.
`
`14
`
`53. To discharge their duties, the officers and directors of the Company
`
`15
`
`were required to exercise reasonable and prudent supervision over the
`
`16
`
`management, policies, practices, and controls of the financial affairs of the
`
`17
`
`Company. By virtue of such duties, the officers and directors of the Company were
`
`18
`
`required to, among other things:
`
`19
`
`a)
`
`ensure that the Company complied with its legal obligations
`
`20
`
`and requirements, including acting only within the scope of its legal authority and
`
`21
`
`disseminating truthful and accurate statements to the investing public;
`
`22
`
`b)
`
`conduct the affairs of the Company in an efficient, business-
`
`23
`
`like manner so as to make it possible to provide the highest quality performance of
`
`24
`
`its business, to avoid wasting the Company’s assets, and to maximize the value of
`
`25
`
`the Company’s stock;
`
`26
`
`c)
`
`properly and accurately guide investors and analysts as to the
`
`27
`
`true financial condition of the Company at any given time, including making
`
`28
`
`
`
`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
`
`15
`
`

`

`Case 3:21-cv-05197-TSH Document 1 Filed 07/06/21 Page 16 of 26
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`accurate statements about the Company’s business prospects, and ensuring that the
`
`Company maintained an adequate system of financial controls such that the
`
`Company’s financial reporting would be true and accurate at al