Pomerantz Appointed Lead Counsel in Orphazyme Securities Litigation

On September 13, 2021, U.S. District Judge Gary Feinerman of the Northern District of Illinois (Eastern Division) appointed Pomerantz LLP as Lead Counsel for the Class on behalf of Marko Busic, the Lead Plaintiff in Busic v. Orphazyme A/S et al., 21-cv-3640 (N.D. Ill.), a securities action brought on behalf of a class of defrauded investors concerning allegations related to the efficacy and commercial prospects for Orphazyme  A/S’s (“Orphazyme” or the “Company”) lead drug candidate arimoclomol.

Orphazyme is a biopharmaceutical company that develops therapies for the treatment of neurodegenerative orphan diseases.  The Company conducts its U.S. operations through its wholly-owned subsidiary, Orphazyme US, Inc., which is focused on U.S. regulatory review and preparing for the Company’s first potential U.S. commercial launch, including legal, commercial, finance, advocacy relations, regulatory, and medical affairs functions.

Orphazyme’s lead drug candidate is arimoclomol, which is in clinical development for four orphan diseases, including Niemann-Pick disease type C (“NPC”), Amyotrophic Lateral Sclerosis (“ALS”), and Inclusion Body Myositis (“IBM”).  In August 2017, Orphazyme initiated a multicenter randomized 1:1, double-blinded, placebo-controlled Phase 2/3 clinical trial for assessing efficacy and safety of arimoclomol citrate 400 mg three times per day in patients with IBM; in August 2018, Orphazyme initiated a 2:1 randomized, double-blinded, placebo-controlled Phase 3 clinical trial assessing efficacy and safety of arimoclomol citrate 400 mg three times per day in patients with ALS; and in September 2020, the U.S. Food and Drug Administration (“FDA”) accepted Orphazyme’s new drug application (“NDA”) for arimoclomol for NPC.

Allegations against Orphazyme  include that: (i) arimoclomol was not as effective in treating IBM as Defendants had represented; (ii) arimoclomol was not as effective in treating ALS as Defendants had represented; (iii) the arimoclomol NDA for NPC was incomplete and/or required additional evidence and data to support the benefit-risk assessment of that NDA; (iv) as a result of (iii), the FDA was unlikely to approve the arimoclomol NDA for NPC in its present form; (v) the Company’s overall business prospects, as well as arimoclomol’s commercial prospects, were significantly overstated; and (vi) as a result, the Offering Documents and Defendants’ public statements throughout the Class Period were materially false and/or misleading and failed to state information required to be stated therein.

On September 4, 2020, Orphazyme filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission (“SEC”) in connection with the IPO, which, after several amendments, was declared effective by the SEC on September 28, 2020 (the “Registration Statement”). 

On September 29, 2020, pursuant to the Registration Statement, Orphazyme’s ADSs began trading on the Nasdaq Global Select Market under the ticker symbol “ORPH.”  That same day, Orphazyme filed a prospectus on Form 424B4 with the SEC in connection with the IPO, which incorporated and formed part of the Registration Statement (collectively, the “Offering Documents”).

Pursuant to the Offering Documents, Orphazyme conducted the IPO, issuing 3,966,146 of its ordinary shares to the U.S. public in the form of 3,966,146 ADSs at the Offering price of $11.00 per ADS, while concurrently offering 3,650,000 of its ordinary shares in Europe in a private placement to qualified investors, for total approximate proceeds of $77,913,174 to the Company before expenses and after applicable underwriting commissions.

On March 29, 2021, Orphazyme issued a press release “announc[ing] its phase 2/3 trial evaluating arimoclomol for the treatment of [IBM] . . . did not meet its primary and secondary endpoints.” On this news, Orphazyme’s ADS price fell $3.59 per ADS, or 28.97%, to close at $8.80 per ADS on March 29, 2021.

On May 7, 2021, Orphazyme issued a press release “announc[ing] topline data from pivotal trial of arimoclomol in [ALS.]”  The press release disclosed that the Company’s “pivotal trial . . . did not meet its primary and secondary endpoints to show benefit in people living with ALS.” On this news, Orphazyme’s ADS price fell $2.81 per ADS, or 32.83%, to close at $5.75 per ADS on May 7, 2021.

Then, on June 18, 2021, Orphazyme issued a press release announcing receipt of a Complete Response Letter from the FDA following the agency’s review of the NDA for arimoclomol for the treatment of NPC.  The press release disclosed that the FDA had rejected the arimoclomol NDA for NPC “based on needing additional qualitative and quantitative evidence to further substantiate the validity and interpretation” of certain data and “that additional data are needed to bolster confirmatory evidence beyond the single phase 2/3 clinical trial to support the benefit-risk assessment of the NDA.” On this news, Orphazyme’s ADS price fell $7.23 per ADS, or 49.66%, to close at $7.33 per ADS on June 18, 2021.

Finally, on June 21, 2021, investor resource website Seeking Alpha reported that “Orphazyme [was] cut to sell at Guggenheim after [the Company’s] regulatory snub” by the FDA, stating, among other things, that “[w]ith a $1.00 price target for the stock indicating a downside of ~86.4%, Guggenheim notes that there is ‘little optionality left in the stock,’ and adds ‘it might make sense to wind down the company.’” On this news, Orphazyme’s ADS price fell $0.81 per ADS, or 11.05%, to close at $6.52 per ADS on June 21, 2021.

As of the time the complaint was filed, the price of Orphazyme ADSs continued to trade below the $11.00 per ADS Offering price, damaging investors.