IsoRay Medical of Richland says it acted in good faith and met the regulations of the Securities and Exchange Commission when it released a news release that led to a lawsuit.
Plaintiffs in the lawsuit have asked that it be certified as a class action.
The news release, which described results of a study looking at lung cancer treatment with an Isoray medical isotope product, was quickly followed by a near doubling of the stock price under what was heavy trading for the stock.
The news release was issued on May 19, 2015, and the stock price went from $1.62 a share to $3.12 the next day.
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But on May 21, 2015, the investment website The Street posted an article with the headline “IsoRay Takes Liberties With Lung Cancer Study Results to Prop Up Stock Price.”
The share price dropped by about a third that day with 52 million trades made, which was 37 times the usual daily volume of trades. Within days, the stock was back to its usual price before the news release.
The lawsuit claims violations of federal securities laws. It seeks damages for those who bought the stock as its price rose based on what plaintiffs say was information that mischaracterized the findings of the lung cancer study.
The 2015 IsoRay news release said that its lung cancer treatment had 96 percent success in local control and 100 percent patient survival at five years in high risk patients according to a new peer-reviewed study published in the on-line journal Brachytherapy.
The IsoRay treatment relies on seeds of radioactive cesium implanted during cancer-removal surgery to release radiation to kill remaining cancer cells. In contrast, conventional radiation requires many trips to a hospital or clinic for treatment.
The study compared IsoRay results with surgery alone and surgery with more traditional radiation.
But the news release failed to make clear that other treatments used historically, such as surgery plus more traditional radiation, provided equivalent rates of local cancer control, plaintiffs said.
It also did not make clear that the five-year survival rate for surgery plus the IsoRay radiation treatment was not significantly different than for patients who had only surgery, plaintiffs said.
IsoRay said the news release linked to the online study.
“It is implausible that the analysts and investors who followed IsoRay and anticipated the release of the study would fail to read the complete study when it became available,” IsoRay said in court documents.
Had the company been intending to mislead investors and analysts, it would not have pointed them to the study, IsoRay said.
While there was no cost to read the abstract of the study, reading the full study required a $35.95 subscription fee, plaintiffs argued.
Plaintiffs also complained that IsoRay did not say in the news release that it sponsored the study, giving money to the doctor who conducted it.
Earlier this month, U.S. Judge Lonny Suko declined to dismiss the lawsuit against IsoRay.
IsoRay in a statement said that the judge found that allegations against the company, if true, state a plausible claim for legal relief.
“The order did not adjudicate the merits of the lawsuit,” the IsoRay statement said. “No other issues were decided in the ruling.”
A trial date has not been set.