On April 18, 2017, Pomerantz LLP was appointed co-lead counsel in a class action lawsuit against Psychemedics Corporation ("Psychemedics" or the "Company") and certain of its officers. The class action, filed in United States District Court, District of Massachusetts, is on behalf of a class consisting of investors who purchased or otherwise acquired Psychemedics securities, seeking to recover compensable damages caused by defendants' violations of the Securities Exchange Act of 1934.
Psychemedics Corporation provides patented, FDA-cleared services for the detection of drug abuse through the analysis of hair samples. The Company's tests provide quantitative information that can indicate the approximate amount of drug ingested, as well as historical data, which can show a pattern of individual drug use over a longer period of time.
The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) through its affiliate Psychemedics Brasil Exames Toxicológicos Ltda. ("Psychemedics Brasil"), the Company engaged in anticompetitive conduct to maintain a monopoly over the Brazilian market in violation of the law; (ii) in turn, Psychemedics lacked effective internal controls over financial reporting; and (iii) as a result of the foregoing, Psychemedics' public statements were materially false and misleading at all relevant times.
On January 31, 2017, Bloomberg reported that a Brazilian judge had ordered Psychemedics' local representative in Brazil, Psychemedics Brasil, to compensate Omega Laboratories, Inc. USA for losses caused by anticompetitive practices used for the purpose of "preventing other companies from accessing (the) market," an indemnification that may cost the Company millions of dollars. The Bloomberg article further reported that Psychemedics Brasil may be further investigated by Brazil's Administrative Council for Economic Defense for engaging in "cartel practices" in an attempt to form a drug testing monopoly.
Psychemedics issued a press release in response to the Brazilian court order denying involvement in the lawsuit, stating that "Psychemedics Brasil has been a distributor of Psychemedics Corporation's hair testing services for more than fifteen years" and that it expects their business in Brazil to "continue as usual."
On this news, Psychemedics' share price fell $6.75, or 26.35%, to close at $18.87 on January 31, 2017.