A year after a company that once dominated the medical cannabis industry was accused of illegally selling its drugs to unscrupulous investors, its stocks have been largely wiped out.
The latest blow to Adamas Pharmaceuticals came when the New York-based company filed for bankruptcy protection on Monday.
Its stock fell nearly 30 percent this week, and analysts expect it will drop further as the company struggles to recover from a series of lawsuits alleging fraud and mismanagement.
Adamas is one of the world’s largest generic drugs companies, supplying nearly half of the U.S. market for generic drugs and nearly 40 percent of the global generic market.
Its shares are down more than 80 percent since last year.
But Adamas CEO Tom Zabel, who took over from the late David Shulkin in October, has been at the helm since the drug company was bought by Pfizer in 2011.
He had been working on a merger with Eli Lilly, the second largest generic drug maker, but withdrew that plan last month after Lilly said it was willing to pay Adamas about $1 billion more for its pharmaceuticals.
Adams’ stock fell by about 10 percent on Monday, while Pfizer stock rose by nearly 40.
Adama’s lawsuit accuses Zabel of “directly profiting” from the sales of the generic drugs through his company, Adamas Pharma LLC, while “otherly profiteering from the illegal sale of Adamas drugs” to third parties.
The lawsuit alleges that Zabel and his company sold “drugs without the patient’s knowledge, for profit, to unscheduled third parties” at a rate of $1.5 billion a year.
The company says it has been operating at a loss for the last six years.
Adamas’ stock was trading down about 30 percent at the close of business on Monday before it fell back to close at $3.70 per share.
Adamans chief executive officer David Shuler told investors on a conference call Monday that he was “totally focused” on continuing to build the company and get the business back on track.
Shulkin told reporters that the company had invested about $250 million to buy back its shares from its creditors.
He said the company plans to raise $1 million more this month to get its finances back on a more solid footing.
“We want to get it back on the right track,” Shulkins said.
“This is a very challenging time for our business.
We’re working hard to turn around and get back to a business that is profitable.”
Lilly is also a defendant in the Adamas case.
The case against Adamas comes as a wave of lawsuits and class-action lawsuits is sweeping the nation.
More than 60 states have opened investigations into the drug companies sales practices, with several states and the District of Columbia launching criminal investigations.
The Justice Department is also investigating whether Adamas violated the federal Controlled Substances Act by selling drugs that were prescribed for serious medical conditions that were not approved for sale to the public.
Lawyers for the company declined to comment on the pending investigations.