CV Technologies, the Edmonton-based makers of flu and cold remedy Cold-fX, has been hit with a $110-million consumer class-action lawsuit.
Marking the latest setback for the besieged biotech company, the lawsuit was filed in Ontario Superior Court in Toronto by two law firms, Siskinds LLP of London, Ont. and Sutt Strosberg LLP of Windsor.
The action, based on Ontario's new investor legislation, arose from CV Tech's June restatement of finances, after it was discovered earlier this year that U.S. sales of lead product Cold-fX were vastly inflated.
The suit was filed by two investors on behalf of any Canadians who acquired CV Technologies (TSX:CVT) shares between Dec. 11, 2006 and June 2007.
Also named in the action are CV Tech president Jacqueline Shan, directors Gordon Tallman and Harry Buddle, who signed the company's financial statements, and the corporation's auditors, Grant Thornton LLP of Edmonton.
Lawyer Jay Strosberg said it is alleged that CV Tech's financial statements were misleading. Strosberg, who specializes in class-action litigation, said his firm received a number of calls from shareholders. "They were concerned at the decrease in share price. We decided to investigate."
The two legal firms have set up a website with information for shareholders who may want to join the action, www.coldfxclassaction.com.
"Investors and members of the public expect that a company's financial statements can be relied upon at all times. Our goal is to prosecute this class action and seek meaningful compensation for the class members."
CV Technologies and the other named defendants have not yet been served with copies of the action and no court date has been set.
"It's going to be an interesting road," Strosberg said.
Dimitri Lascaris, a lawyer with Siskinds', said investors deserve relief when they suffer losses due to inaccurate information.
"Our securities laws must have teeth if the investments of Canada's working families are to be protected."
Officials with CV Technologies did not immediately return a phone call seeking comment today.
Typically, such actions can take years to wind their way through the legal system or reach settlement.
This is the second time that Ontario's investor protection legislation has been used in a court case. The first proposed class action, currently before the courts, was brought against Imax Corp., also filed jointly by Siskinds LLP and Sutts Strosberg LLP.
CV Technologies has had a rough ride in recent months. On June 12, the company resumed trading on the TSX for the first time since April, when regulators in Alberta, B.C. and Ontario slapped cease-trade orders against the company.
On June 14, the company filed restatements of previously reported financial statements for the year ended Sept. 30, 2006, and the quarters ended Dec. 31, 2006, and March 31, 2007. The company restated 2006 sales at $41.4 million, compared to the originally reported revenue of $47 million.
The company is restructuring and has hired a new COO. Following the disappointing launch of Cold-fX in the U.S. market, the company's vice president of sales resigned.
CV Technologies shares closed Friday's session up a penny to $1.02. Its 52-week trading range has been between 60 cents and $1.15.