BLOOMINGTON – Catalent has been named in a lawsuit.
The complaint was filed in New Jersey District Court by Labaton Sucharow, accusing Catalent of concealing the fact that COVID-19-related profits were beginning to decline as the pandemic waned.
Catalent experienced rapid growth at the beginning of the COVID-19 pandemic, working with Moderna and AstraZeneca to package vaccine syringes. But Catalent allegedly cut corners in production to keep pace with rapid growth, which Catalent allegedly hid from investors in misleading public statements.
Catalent’s executives and directors also allegedly began inflating reported revenues and falsely representing demand for its products. The company sold more to direct customers including Johnson & Johnson, Pfizer, and GlaxoSmithKline than those buyers could ultimately provide to healthcare companies and consumers, according to the complaint.
When Catalent disclosed that demand for its COVID-19 products, the news prompted a 7.4% stock decrease to close at $92.28 per share on August 29, 2022, according to the complaint. After that, Catalent allegedly continued to misrepresent their revenue, earnings, and demand, the complaint says.
Then on November 1, 2022, the company lowered its financial guidance, reported that its quarterly earnings declined to zero due to falling demand, and disclosed the regulatory issues at its key facilities, which were negatively impacting the financial results.
Catalent then revealed that it was carrying $400 million in excess inventory, according to the complaint.
GlassHouse LLC, a stock analyst company, issued a report the following month highlighting “accounting red flags” at Catalent, which detailed the inflated revenues and demand, according to the complaint. Catalent’s stock price dropped 3.6% to close at $45.54 on December 8, 2022, the day that the report was released.
The shareholder suing on behalf of Catalent seeks to recover damages for the period between August 30, 2021, and October 31, 2022. He alleges that current and former executives and directors violated the Securities Exchange Act, breached their fiduciary duties unjustly enriched themselves, and wasted corporate assets.
A separate class action filed against Catalent in February is still pending in the District of New Jersey. That suit alleges that the company inflated its revenue figures through fraudulent accounting, padding its financial results to portray continued growth after its initial surge from packaging the vaccines into syringes.
Catalent will not comment on the pending lawsuits.
The lawsuit can be viewed below:
