Sirtex Medical has been given a deadline to enter settlement talks with lawyers alleging shareholders were misled by the company's strong sales forecasts.
Law firm Portfolio Law has told Sirtex it will commence proceedings in the Federal Court if the company fails to indicate by midday on February 6 that it wants to discuss a settlement.
The proposed legal action is linked to Sirtex's statement in August that it would achieve double digit dose sales growth in the 2016/17 financial year, a forecast it downgraded on December 9.
Sirtex shares plunged 37 per cent on the day it lowered its expectations for sales growth and warned full year earnings were anticipated to decline 12 per cent.
Portfolio Law is representing shareholders that bought Sirtex shares after the company's August forecasts and still held them on December 9.
Sirtex has asked for an extension of time to respond to Portfolio Law's claims to February 13, and said it will vigorously defend any proceedings.
The lawyers claim the cancer treatment developer failed to immediately disclose weaker-than-expected dose sales which would had have a material effect on the value of the company's shares, and thereby breached its disclosure obligations.
Portfolio Law said Sirtex had "no reasonable grounds" for projecting double-digit growth in dose sales for the 2016/17 financial year.
The company was aware of increased competition and restrictions in reimbursements to patients for the supply of SIR-Spheres, it said.
Despite this, the company's then chief executive Gilman Wong reaffirmed the group's guidance at Sirtex's annual general meeting on October 25.
Portfolio Law said Sirtex's failure to disclose its dose sales issues caused the company's shares prior to December 9 to be substantially greater than their true value.
The shareholders represented have suffered loss and damage because of Sirtex's failure to disclose the "dose sales matters to the market" immediately, the law firm said, but the amount of compensation being sought has not been revealed.
Sirtex shares were halted from trade on Tuesday when it notified the market of the potential legal action, and they dropped 16 cents, or 1.1 per cent, to $14.22 on Wednesday.
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