CLEARWATER — A shareholder this week sued surgical device maker Apyx Medical in federal court, contending that the price of the company's stock plunged after Apyx misled investors, then belatedly shared bad news about a clinical test of its signature product.
The suit seeks class-action status and was filed in U.S. District Court in Tampa by stockholder Kyle Pritchard on behalf of others who bought Apyx stock from Aug. 1, 2018 to this April 1. Along with the company, which was known as Bovie Medical until January, the suit names Apyx chief executive officer Charles D. Goodwin as a defendant.
"Apyx Medical Corp. is aware of the filing of the lawsuit," Apyx investor relations spokesman Mike Piccinino said in an email to the Tampa Bay Times on Friday. "While the company’s policy is not to comment about ongoing litigation, the company intends to vigorously defend against this action."
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Apyx, which is based on Ulmerton Road south of the St. Pete-Clearwater International Airport, makes a high-tech scalpel and surgical tool known as J-Plasma, which is sold under the Renuvion Cosmestic Technology brand, that surgeons can use to cut, coagulate and remove tissue during cosmetic surgery and other procedures with minimal effect to surrounding tissues.
The company announced in December that it was applying for regulatory approval to use J-Plasma in dermal resurfacing, a rejuvenation procedure that the American Society of Plastic Surgeons says can be used to treat wrinkles, spots, scars and other conditions. The study looked at the use of J-Plasma on reducing wrinkles in 55 patients treated at three different clinics. In January, Goodwin mentioned the clinical trial as a milestone that helped provide a bases for a "very positive" outlook for 2019.
But on Feb. 21, Pritchard's suit notes, White Diamond Research, a stock research firm that sells information to hedge funds and wealthy investors, issued a report suggesting that the test results for J-Plasma were coming up short. In response, the company’s share price fell nearly 25 percent to $6.40 a share “on unusually heavy trading volume” the same day, the suit contends.
Then, on April 1, Apyx disclosed that it had withdrawn its application to have regulators clear J-Plasma for dermal resurfacing as a result of concerns about the tests raised by the U.S. Food and Drug Administration. On that news, the suit adds, Apyx’s saw more heavy trading that drove its share price down 36 percent to $4.46 per share when the market closed the following day.
In its disclosure on April 1 Apyx said the clinical test "yielded no serious adverse events." It did acknowledge that results fell short of the study's goal and that the FDA raised an issue about the consistency of the results. First, 75 percent of patients were expected to see a pre-determined quantifiable improvement in their appearance as measured against a standard scale used to assess the results of plastic surgery, but only 62 percent achieved the required score. Also, test results appeared to be better coming from one testing center than from two others.
“We are actively engaged with the agency to determine what additional data, studies and analyses may be required" for another clinical test to determine whether J-Plasma could be used in dermal resurfacing procedures, Goodwin said in the company's announcement on April 1.
Pritchard's suit contends that Apyx and Goodwin made false or misleading statements. Failing to share the bad news about the clinical trial sooner meant that the company's optimistic expectations "lacked a reasonable basis," the suit says, and as the value of the stock fell, Pritchard and other stockholders "suffered significant losses and damages." The suit, filed by law firms in Vero Beach and Los Angeles, seeks an unspecified amount of compensatory damages. Meanwhile, two other law firms in New York and Pennsylvania have announced that they are recruiting potential plaintiffs for a potential class-action lawsuit.
Friday afternoon, Apyx's stock was trading on the NASDAQ exchange at $3.85 a share, up nearly 5 percent.
Contact Richard Danielson at [email protected]om or (813) 226-3403. Follow @Danielson_Times