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Class Action Lawsuit Filed Against Atossa Genetics Following Voluntarily Recall

NEW YORK (GenomeWeb News) – A class action lawsuit has been filed in federal court alleging Atossa Genetics violated federal securities laws.

In a complaint filed in the US District Court for the Western District of Washington on Thursday, plaintiff Nicholas Cook alleges Atossa made false and/or misleading statements and failed to disclose material adverse facts about its business and financial conditions.

Specifically, the lawsuit stems from concerns raised by the US Food and Drug Administration about the Seattle-based company's marketing and instructions for use of its ForeCYTE Breast Health Test and the Mammary Aspiration Specimen Cytology (MASCT) Test device. Last week, Atossa voluntarily recalled the test and the device from the market.

The lawsuit is filed on behalf of all Atossa shareholders who purchased the company's stock between Nov. 8, 2012 — when the firm went public — and Oct. 4, 2013, according to the complaint.

The plaintiff alleged that Atossa misled investors into believing it had complied with FDA rules regarding clearance of Atossa's products, and notes that in the company's prospectus for its initial public offering, it said that its products were "cleared" by FDA for collecting fluid samples from "the breast milk ducts, where, according to the National Cancer Institute, over 95 percent of breast cancers arise."

In fact, the plaintiff claimed, Atossa changed the design of its ForeCYTE test and MASCT, including the test's nipple aspirate fluid specimen collection process, and as a result, the company had to seek premarket approval from FDA.

"The company, however, failed to contact the FDA after materially altering its products, and misled investors regarding its compliance with applicable FDA rules and regulations," according to the complaint.

FDA's concerns about the ForeCYTE test and MASCT were first publicly disclosed in February, when Atossa said in a US Securities and Exchange Commission document that it had received a warning letter from the FDA.

The day immediately following the voluntary recall by Atossa of the test and MASCT device, its stock closed down 46 percent, and as of the close of the market on Thursday, Atossa's shares were down 62 percent compared to its closing price on Oct. 4, before it announced the recall.

"As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the company's common stock, plaintiff and other class members have suffered significant losses and damages," the complaint said.

Along with Atossa, the firm's President and CEO Steven Quay and other management team members and directors are named as defendants.

The plaintiff is seeking damages in an amount to be determined.

On deadline, Atossa did not respond to a request for comment.

In Friday morning trading on the Nasdaq, the firm's shares were down 4 percent at $1.96.