The maker of popular cold remedy Cold-FX has reached an agreement to settle two class-action lawsuits with shareholders in an effort to bring a conclusion to three years of devastating news and plunging share values.
Afexa Life Sciences Inc. , formerly known as CV Technologies Inc., announced Wednesday it has reached a deal to settle lawsuits that also named its chief science officer, two former directors and the company's former auditors.
The agreement still requires court approval. The company said the claims made by shareholders "remain unproven."
"The settlement does not constitute any admission of liability by Afexa or its officers, directors and employees," it said in a statement.
Lawyer Jay Strosberg, whose firm launched the class action suit on behalf of shareholders in 2007, said the settlement is for $7.1-million, which represents 50 per cent of the approximately $14-million lost by shareholders who bought the stock between the time inflated financial results were released in late 2006 and the company announced its sales would fall in 2007.
"This is a great result for the class members," he said Wednesday. "Any time you can recover a decent size of the total damages without having to litigate and risk losing, it's a great result. So we're very pleased."
He said shareholders will be eligible to participate in the settlement if they bought Afexa stock between Dec. 11, 2006, and March 23, 2007.
The Edmonton-based pharmaceutical firm was one of the fastest-growing small company stocks on the Toronto Stock Exchange in the mid-2000s, and its ginseng-based herbal cold remedy was touted by hockey personalities like Don Cherry and Mark Messier. But the company saw its financial health decline after it launched an ambitious U.S. expansion in 2006.
Afexa reported net revenue of $47-million that year, but it later revealed those numbers were based on the volume of product delivered to U.S. retailers to initially stock their shelves. After sales lagged and inventory was returned, the company revealed in 2007 that it would have to restate its results for 2006 and the first quarter of 2007. The company said it underestimated the amount of product that would be returned when it booked its sales for the periods.
Afexa reduced its 2006 net profit to $639,000 from $4.1-million, and lowered its earnings for the first quarter of 2007 to a loss of $3.6-million from an original loss of $1.6-million. The company's shares, which hit a high of $4.46 each in October, 2006, dropped quickly and have never recovered their former glory. The shares closed at 56 cents on the Toronto Stock Exchange Wednesday, up 5 cents.
CV changed its name to Afexa in April this year as part of a rebranding strategy.
Janet McFarland