UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
___________________________________
)
DANIEL KURSMAN on behalf of himself)
and all others similarly )
situated, ) CIVIL ACTION NO. 99-CV-0201
Plaintiff, )
v. )
THERAGENICS CORP., M. CHRISTINE ) CLASS ACTION COMPLAINT
JACOBS and BRUCE W SMITH, ) FOR VIOLATIONS OF
) FEDERAL SECURITIES LAWS
Defendants. ) [filed Jan. 22, 1999]
___________________________________)
NATURE OF THE ACTION
1. This is a class action on behalf of all purchasers
of the common stock of Theragenics Corp. ("Theragenics" or the
"Company") between January 29, 1998, and January 11, 1999,
inclusive, (the "Class Period"). Seeking to pursue remedies under
the Securities Exchange Act of 1934 (the "Exchange Act").
JURISDICTION AND VENUE
2. The claims asserted herein arise under and
pursuant to Sections 10(b) and 20(a) of the Exchange Act [15
U.S.C. §§ 78j(b) and 78t(a)] and Rule 10b-5 promulgated
thereunder by the Securities and Exchange Commission ("SEC") [17
C.F.R. § 240.10b-5].
3. This Court has jurisdiction over the subject
matter of this action pursuant to 28 U.S.C. §§1331 and 1337, and
Section 27 of the Exchange Act [15 U.S.C. §78aa].
4. Venue is Proper in this District pursuant to sec-
tion 27 of the Exchange Act and 28 U.S.C. §1391(b). Theragenics
Maintains its principal executive offices in this District and
the acts changed herein, including the preparation and dissemina-
tion of materially false and misleading information, occurred in
substantial part in this District.
5. In connection with the acts alleged in this com-
plaint, defendants, directly or indirectly, used the means and
instrumentalities of interstate commerce, including, but not
limited to, the mails, interstate telephone communications and
the facilities of the national securities markets.
PARTIES
6. Plaintiff Daniel Kursman purchased Theragenics
common stock at artificially inflated prices during the Class
Period and has been damaged thereby, as set forth in the
accompanying certification incorporated by reference herein.
7. Defendant Theragenics is a Delaware corporation
with its principal executive offices at 5325 Oakbrook Pkwy,
Norcross, Georgia 30093. Theragenics produces and sells
implantable radiation devices used in the treatment of prostate
cancer.
8. (a) The individual defendants identified below
served, at all times material to the claims set forth herein, as
senior officers and/or directors of Theragenics in the positions
set forth opposite their names (the "Individual Defendants"):
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Name Position
M. Christine Jacobs President, Chief Executive
Officer and Chairman
Bruce W. Smith Chief Financial Officer,
Treasurer and Secretary
(b) Because of the Individual Defendants'
positions with the Company, they had access to the adverse
undisclosed information about its business, operations,
operational trends, financial statements, markets and present and
future business prospects via access to internal corporate
documents (including the Company's operating plans, budgets and
forecasts and reports of actual operations compared thereto),
conversations and connections with other corporate officers and
employees, attendance at management and Board of Directors
meetings and committees thereof and via reports and other
information provided to them in connection therewith.
9. It is appropriate to treat the Individual
Defendants as a group for pleading purposes and to presume that
the false, misleading and incomplete information conveyed in the
Company's public filings, press releases and other publications
as alleged herein are the collective actions of the narrowly
defined group of defendants identified above. Each of the above
officers and/or directors of Theragenics, by virtue of their
high-level positions with the Company, directly participated in
the management of the Company, was directly involved in the day-
to-day operations of the Company at the highest levels and was
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privy to confidential proprietary information concerning the
Company and its business, operations, growth, financial
statements, and financial condition, as alleged herein. Said
defendants were involved in drafting, producing, reviewing and/or
disseminating the false or misleading statements and information
alleged herein, were aware (or recklessly disregarded) that the
false and misleading statements were being issued regarding the
Company and approved or ratified these statements, in violation
of the federal securities laws.
10. As officers and/or directors and controlling
persons of a publicly-held company whose common stock was, and
is, registered with the SEC pursuant to the Exchange Act, traded
on the NASDAQ National Market and New York Stock Exchange, and
governed by the Provisions of the federal securities laws, the
Individual Defendants each had a duty to disseminate promptly
accurate and truthful information with respect to the Company's
financial condition and performance, growth, operations,
financial statements, business, markets, management, earnings and
present and future business prospects, and to correct any
previously-issued statements that had become materially
misleading or untrue, so that the market price of the Company's
publicly-traded securities would be based upon truthful and
accurate information. The Individual Defendants'
misrepresentations and omissions during the Class Period violated
these specific requirements and obligations.
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11. The Individual Defendants participated in the
drafting, preparation, and/or approval of the various public and
shareholder and investor reports and other communications
complained of herein and were aware of or recklessly disregarded
the misstatements contained therein and omissions therefrom, and
were aware of their materially false and misleading nature.
Because of their Board membership and/or executive and managerial
positions with Theragenics, each of the Individual Defendants had
access to the adverse undisclosed information about Theragenics's
business prospects and financial condition and performance as
particularized herein and knew (or recklessly disregarded) that
these adverse facts rendered the positive representations made by
or about Theragenics and its business issued or adopted by the
Company materially false and misleading.
12. The Individual Defendants, because of their
positions of control and authority as officers and/or directors
of the Company, were able to and did control the content of the
various SEC filings, press releases and other public statements
pertaining to the company during the Class Period. Each
Individual Defendant was provided with copies of the documents
alleged herein to be misleading prior to or shortly after their
issuance and/or had the ability and/or opportunity to prevent
their issuance or cause them to be corrected. Accordingly, each
of the Individual Defendants is responsible for the accuracy of
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the public reports and releases detailed herein and is therefore
primarily liable for the representations contained therein.
13. Each of the defendants is liable as a participant
in a fraudulent scheme and course of business that operated as a
fraud or deceit on purchasers of Theragenics common stock, by
disseminating materially false and misleading statements and/or
concealing material adverse facts. The scheme: (i) deceived the
investing public regarding Theragenics's business, financial
statements, growth, operations and the intrinsic value of
Theragenics's common stock; and (ii) caused plaintiff and other
members of the Class to purchase Theragenics common stock at
artificially inflated prices.
SUBSTANTIVE ALLEGATION
Background Facts
14. Theragenics was founded in 1981 and went public in
1986. Theragenics manufactures Theraseed(R) radioactive implants
which are used in the treatment of prostate cancer. The active
ingredient in Theraseed(R) is palladium-103, a radioactive
isotope.
15. The Theraseed(R) process is performed on an
outpatient basis and involves implanting between 50 and 100
Theraseeds(R) into the patient's prostate guided by an ultrasound
probe. Traditional methods for treating prostate cancer are
radical surgery (the removal of the entire prostate), which is
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performed in 70% of the treatment cases, and external beam
radiation, which is performed in 10% of the treatment cases.
16. In June 1997, Theragenics signed an agreement with
Indigo medical ("Indigo"), a subsidiary of Johnson & Johnson
("J&J"), which provides that J&J will purchase all of its
palladium-l03 requirements for prostate cancer treatment from
Theragenics and Theragenics must give J&J a right of first
refusal for any palladium-103 intended for use in the treatment
of prostate cancer. J&J receives a selling concession from
Theragenics which had not been publicly disclosed. The agreement
with Indigo permitted Theragenics to focus solely on the
manufacture of Theraseeds(R) and saved it the expense of
developing and maintaining its own sales force.
17. By the third quarter of 1997, Theragenics had
transferred the bulk of the selling and marketing
responsibilities to Indigo. As revealed in its Form 10-Q for the
period ending September 30, 1997, by the end of September 1997.
Theragenics' sales to Indigo represented 72% of the Company's
total sales of Theraseeds(R).
Materially False and Misleading
Statements Issued During The Class Period
18. The Class Period commences on January 29, 1998.
On that date, the Company issued a press release announcing that
it had entered into an agreement to purchase six additional
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cyclotrons the device used to produce palladium-103. The
press release stated in pertinent part:
The purchase agreement represents a major
capital expenditure by Theragenics in its
efforts to supply anticipated increase in
Theraseed demand generated by its sales and
marketing partner, Indigo Medical, a Johnson
& Johnson Company . . .
"The acceptance of the Company's non-invasive
treatment for prostate cancer by the public
and the medical community has been
outstanding. The additional cyclotrons will
allow Theragenics to keep pace with the rapid
increase in demand," said Christine Jacobs,
president and chief executive officer.
19. On February 26, 1998, an article on Theragenics
appeared in the Investor's Business Daily. In the article,
defendant Jacobs highlighted the Company's agreement with Indigo.
The article stated pertinently:
While waiting for data on Theraseed to
mature. Theragenics searched for a way to
jump-start sales. It found the answer with a
unit of Johnson & Johnson. The company
signed a seven-year distribution agreement
with J&J's Indigo Medical Inc. in June.
Indigo now has exclusive rights to market
Theraseed worldwide. This deal should help
Theragenics more than triple annual revenue
to $84 million in 2000 from $24.6 million
last year, analysts say.
"In urology and prostate cancer treatment,
there has never been a presence with a
marketing prowess like Johnson & Johnson,"
said Theragenics President and CEO, Christine
Jacobs.
20. On April 21, 1998, Theragenics issued a press
release announcing its financial results for the first quarter of
1998, the period ending March 31, 1998. The Company reported
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revenues of $8,280,947 and net income of $3,300,556. Defendant
Jacobs commented on the results in pertinent part as follows:
Acceptance of Theraseed(R) as a treatment of
choice for prostate cancer by both doctors
and patients continues to escalate. This was
supported by manufacturing's ability to
consistently supply Theraseed(R) to a market
that shows robust strength as reflected by
our first quarter results.
21. On June 2, 1998, Theragenics issued a press
release announcing that the first European Theraseed(R) implant
had been completed in Italy. The press release stated:
Receiving our CE Mark and shipping our first
order to Europe is another step forward in
the evolution of Theragenics. This is just
one example of why the Company's agreement
with Indigo is so powerful. . .
22. The statements referenced above in ¶¶ 19-21 were
each materially false or misleading when issued as they
misrepresented and/or omitted the following adverse facts which
then existed and disclosure of which was necessary to make the
statements made not false and/or misleading, including:
(a) it was not true that the Company's Theraseed
Process was gaining increasing acceptance as the Company was
experiencing decreasing demand for its Theraseed(R) product as
patients were reluctant to employ the procedure given its limited
history;
(b) Indigo was inexperienced in the "seed" market
and therefore would be required to expend significant resources
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learning that market before it could effectively market and sell
Theraseed(R);
(c) As a result of its inexperience in the
industry and lack of knowledge about the industry, Indigo's sales
force was encountering significant difficulties in marketing and
selling Theraseeds(R) and, accordingly, sales of Theraseeds(R)
were declining. Thus, it was not likely that the Indigo
agreement would lead to "increased demand" in the near-term but
rather decreased demand;
(d) Indigo was employing a different sales
approach from that historically employed by Theragenics. Instead
of marketing and selling to physicians, healthcare providers and
patients, Theragenics directed its efforts solely to physicians
and healthcare providers. As a result, patient awareness of the
benefits of the Theraseed, a historically important factor
driving the Company's sales, was eroding and negatively impacting
sales;
(e) Indigo's inability to effectively market and
sell Theraseed(R) was enabling the Company's competition to
garner market share from the Company.
23. On July 2, 1998, the price of Theragenics common
stock dropped 36 percent as news reports circulated that an
analyst had stated that the market for implantable prostate
cancer treatment was facing stiff competition and academic
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studies questioned the seed technique versus other techniques. A
report on Bloomberg quoted defendant Jacobs as stating:
It's unfortunate that the market has decided
to compare our 11 years of results to those
companies with IPOs and no manufacturing
experience . . .
24. On July 21, 1998, Theragenics issued a press
release announcing its financial results for the second quarter
of 1998, the period ending June 30, 1998. The Company reported
revenues of $8,713,860 and net income of $3,333,429 for that
period. Defendant Jacobs commented on the results in pertinent
part as follows:
We've had another record quarter. It once
again proves Theragenics' ability to build on
its history of profitable operations. We
completed the construction of the first phase
[of] our new production facility which is now
in operation. Cyclotron number five is
running, number six is nearing completion of
its installation process and number seven has
arrived. Upon completion, our 1998 expansion
program will effectively double our
manufacturing capacity in order to meet the
continuing demand for Theraseed(R).
25. On October 22, 1998, Theragenics issued a press
release announcing its financial results for the third quarter of
1998, the period ending September 30, 1998. The Company reported
revenues of $11,128,933 and net income of $4,031,398 for that
period. Defendant Jacobs commented on the results in pertinent
part as follows:
This was an exciting quarter for Theragenics.
Third quarter not only resulted in record
revenues and profit it marked our switch to
the New York Stock Exchange. Our new
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manufacturing facility became fully
operational during the quarter and we
continue to add new manufacturing capacity.
This increased capacity will allow us to
offer more cancer patients the opportunity to
take advantage of the Theraseed(R) treatment.
26. The statements referenced above in ¶¶ 23-25 were
each materially false or misleading for the same reasons stated
above in ¶ 22. In addition, the statements referenced above in
¶¶ 23-25 were each materially false or misleading when issued as
they misrepresented and/or omitted the following adverse facts
which then existed and disclosure of which was necessary to make
the statements made not false and/or misleading, including:
(a) Indigo had reached saturation in the
physician/healthcare provider market for Theraseed(R) and was
experiencing declining demand for Theraseed(R) product. As a
result, Indigo was attempting to reformulate its sales and
marketing approach which would take approximately six months to
accomplish:
(b) Certain academic studies, which suggested
that the "seed" procedure was not superior to traditional
treatments, were negatively impacting sales of Theraseed(R); and
(c) Theragenics was being negatively impacted by
excess production capacity as the Company had brought significant
production on line and Indigo was unable to generate increasing
sales. Inasmuch as the Company had largely dismantled its sales
force in reliance on the Indigo agreement, it had no ability to
sell its excess Theraseed(R) and, accordingly, was experiencing
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declining sales. Given that palladium-103 has a half-life of 17
days. Theragenics cannot maintain substantial inventory of
Theraseed(R), thus, the Company would have to slow production to
match demand, thereby increasing costs.
The Truth Begins To Emerge
27. On or about January 11, 1999, Theragenics shocked
the market by announcing that it had "experienced softness" in
its fourth quarter sales. The Company reported that revenues for
the quarter were $9,834,512 and net income was $3,357,159, or
$0.11 per share (unchanged from the prior year). Defendant
Jacobs revealed the true state of the Indigo relationship
stating:
Although Theragenics has completed another
strong year, we experienced softness in
fourth quarter sales. This was the first
quarter in which sales responsibility was
substantially transitioned to our marketing
partner, Indigo Medical, a Johnson & Johnson
Company, and in which we had excess capacity.
Indigo Medical's efforts have confirmed our
experience that in addition to marketing
Theraseed(R) to physicians and other health
care professionals, substantial attention and
resources must be devoted to educating the
ultimate consumer regarding the benefits of
brachytherapy. In accordance with this
strategy, Indigo Medical has made adjustments
to its marketing and sales focus which we
anticipate will begin to show results in the
second half of 1999 . . .
28. On January 11, 1999, in response to this
announcement which revealed that the Indigo agreement, which had
been highly promoted by defendants throughout the Class Period,
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was a failure and would take six months, at least, to produce
positive results -- if ever -- the price of Theragenics stock
plummeted approximately 33.8%, from $15.3125 per share to $10.125
per share, on extremely heavy trading volume.
29. Following the Company's announcement, the Company
held a conference call with analysts and investors to explain the
reported results. During that call, defendant Jacobs admitted
that she closely monitored the performance of Indigo on, at least
a monthly basis, stating:
There are monthly updates with Theragenics to
get our perspective. And I monitored the
situation personally. I do not delegate it
and it has been and is my highest priority
now.
Thus, it is clear that defendant Jacobs was aware, or recklessly
disregarded, at all times that Indigo was employing significantly
different sales and marketing strategies than those historically
employed by the Company and that Indigo was experiencing
declining sales, in part, as a result of this sales approach.
30. During that same conference call, defendant Jacobs
revealed that it would take until the second half of 1999 for the
Company to turn things around. Defendant Jacobs also stated that
"[b]oth Indigo and Theragenics will no longer provide updates or
comments during a quarter." Furthermore, defendant Jacobs
admitted during the conference call that, contrary to the
Company's repeated representations during the Class Period.
Indigo was inexperienced in the urology field and would have to
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get up the "learning curve." In this regard, defendant Jacobs
stated:
Let's turn to our partnership, sure we were
disappointed in them, but that's a short term
issue. They are a large company learning a
new industry. Once they get to drive and,
yes, Theragenics understands the learning
curve. As they learn, they will grow and
what will come out of this is a J&J company
with an understanding of this industry and a
commitment to its dynamics and that dynamic
will be knowledge of the doctors, patients
and what it takes to drive a market that is
still in its infancy with a lot of brand new
players.
31. The market for Theragenics common stock was
open, well-developed and efficient at all relevant times. As a
result of these materially false and misleading statements and
failures to disclose, Theragenics common stock traded at
artificially inflated prices during the Class Period until the
time that it was communicated to the market that the Indigo
agreement was a failure. Plaintiff and other members of the Class
purchased or otherwise acquired Theragenics common stock relying
upon the integrity of the market price of Theragenics stock and
market information relating to Theragenics and have been damaged
thereby.
32. During the Class Period, defendants materially
misled the investing public, thereby inflating the price of
Theragenics stock, by publicly issuing false and misleading
statements and omitting to disclose material facts necessary to
make defendants' statements, as set forth herein, not false and
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misleading. Said statements and omissions were materially false
and misleading in that they failed to disclose material adverse
information and misrepresented the truth about the Company, its
business and operations, including, inter alia:
(a) it was not true that the Company's
Theraseed(R) process was gaining increasing acceptance as the
Company was experiencing decreasing demand for its Theraseed(R)
product as patients were reluctant to employ the procedure given
its limited history:
(b) Indigo was inexperienced in the "seed" market
and therefore would be required to expend significant resources
learning that market before it could effectively market and sell
Theraseed(R);
(c) As a result of its experience in the
industry and lack of knowledge about the industry, Indigo's sales
force was encountering significant difficulties in marketing and
selling Theraseeds(R) and, accordingly, sales of Theraseed(R)
were not expanding. Thus, it was not likely that the Indigo
agreement would lead to "increased demand" in the near-term but
rather decreased demand;
(d) Indigo was employing a different sales
approach from that historically employed by Theragenics. Instead
of marketing and selling to physicians, healthcare providers and
patients, Indigo directed its efforts solely to physicians and
healthcare providers. As a result, patient awareness of the
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benefits of the Theraseed(R), a historically important factor
driving the Company's sales, was eroding and negatively impacting
sales;
(e) Indigo's inability to effectively market and
sell Theraseed(R) was enabling the company's competition to
garner market share from the Company;
(f) Indigo had reached saturation in the
physician/healthcare provider market for Theraseed(R) and was
experiencing declining demand for Theraseed(R) product. As a
result, Indigo was attempting to reformulate its sales and
marketing approach which would take approximately six-months to
accomplish;
(g) Certain academic studies, which suggested
that the "seed" procedure was not superior to traditional
treatments, were negatively impacting sales of Theraseed(R); and
(h) Theragenics was being negatively impacted by
excess production capacity as the Company had brought significant
production on line and Indigo was unable to generate increasing
sales. Inasmuch as the Company had dismantled its sales force in
reliance on the Indigo agreement, it had no ability to sell its
excess Theraseed(R) and, accordingly, would experience declining
sales. Given that palladium-103 has a half-life of 17 days,
Theragenics cannot maintain substantial inventory of
Theraseed(R), thus, the Company would have to slow production to
match demand, thereby increasing costs.
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33. At all relevant times, the material
misrepresentations and omissions particularized in this Complaint
directly or proximately caused or were a substantial contributing
cause of the damages sustained by plaintiff and other members of
the Class. As described herein, during the Class Period,
defendants made or caused to be made a series of materially false
or misleading statements about Theragenics's business prospects
and operations. These material misstatements and omissions had
the effect of creating in the market an unrealistically positive
assessment of Theragenics and its business, prospects and
operations, thus causing the Company's common stock to be
overvalued and artificially inflated at all relevant times.
Defendants' materially false and misleading statements during the
Class Period resulted in plaintiff and other members of the Class
purchasing the Company's common stock at an artificially inflated
price, thus causing the damages complained of herein.
Additional Scienter Allegations
34. As alleged herein, defendants acted with scienter
in that defendants knew that the public documents and statements
issued or disseminated in the name of the Company were materially
false and misleading; knew that such statements or documents
would be issued or disseminated to the investing public; and
knowingly and substantially participated or acquiesced in the
issuance or dissemination of such statements or documents as
primary violations of the federal securities laws. As set forth
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elsewhere herein in detail, defendants, by virtue of their
receipt of information reflecting the true facts regarding
Theragenics, their control over, and/or receipt and/or
modification of Theragenics's allegedly materially misleading
misstatements and/or their associations with the Company which
made them privy to confidential proprietary information
concerning Theragenics, participated in the fraudulent scheme
alleged herein.
35. The Individual Defendants engaged in such a scheme
to inflate the price of Theragenics common stock in order to: (i)
protect and enhance their executive positions and the substantial
compensation and prestige they obtained thereby; (ii) enhance the
value of their personal Theragenics securities; and (iii) to
permit profitable stock sales by Theragenics insiders.
35. The following chart demonstrates the insider
selling by the individual Defendants and certain directors of
Theragenics:
NAME DATE SHARES PRICE PROCEEDS
Smith, B.W. 01/30/98 50,000 48.71 $2,435,500.00
Klimkowski, C.R. 02/02/98 8,000 49.79 $ 398,320.00
02/05/98 400 55.00 $ 22,000.00
Jacobs, M.C. 02/11/98 5,000 53.44 $ 257,200.00
Saunders, P.A. 04/23/98 23,000 31.27 $ 719,210.00
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04/28/98 20,000 29.39 $ 587,800.00
Carter, O.L. 05/08/98 4,000 28.25 $ 113,000.00
05/08/98 10,000 27.50 $ 275,000.00
05/12/98 16,000 26.01 $ 416,160.00
05/13/98 16,000 27.00 $ 432,000.00
TOTAL PROCEEDS $5,666,190.00
Plaintiff's Class Action Allegations
37. Plaintiff brings this action as a class action
pursuant to Federal Rule Of Civil Procedure 23(a) and (b)(3) on
behalf of a Class, consisting of all persons who purchased
Theragenics common stock between January 29, 1998, and January
11, 1999, inclusive (the "Class Period") and who were damaged
thereby. Excluded from the Class are defendants, the officers
and directors of the Company, at all relevant times, members of
their immediate families and their legal representatives, heirs,
successors or assigns and any entity in which defendants have or
had a controlling interest.
38. The members of the Class are so numerous that
joinder of all members is impracticable. While the exact number
of Class members is unknown to plaintiff at this time and can
only be ascertained through appropriate discovery, plaintiff
believes that there are hundreds or thousands of members in the
proposed Class. As of May 12, 1998, Theragenics reported that it
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had at least 29,178,132 shares of Theragenics common stock
outstanding. From the start of the Class Period to April 1998,
Theragenics's common stock was actively traded on the NASDAQ
National Market and, thereafter, it was traded on the New York
Stock Exchange ("NYSE"). Record owners and other members of the
Class may be identified from records maintained by Theragenics or
its transfer agent and may be notified of the pendency of this
action by mail, using the form of notice similar to that custom-
arily used in securities class actions.
39. Plaintiff's claims are typical of the claims of
the members of the Class as all members of the Class are
similarly affected by defendants' wrongful conduct in violation
of federal law that is complained of herein.
40. Plaintiff will fairly and adequately protect the
interests of the members of the Class and has retained counsel
competent and experienced in class and securities litigation.
41. Common questions of law and fact exist as to all
members of the Class and predominate over any questions solely
affecting individual members of the Class. Among the questions
of law and fact common to the Class are:
(a) Whether the federal securities laws were vio-
lated by defendants' acts as alleged herein;
(b) Whether statements made by defendants to the
investing public during the Class Period misrepresented material
facts about the business and operations of Theragenics; and
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(c) To what extent the members of the Class have
sustained damages and the proper measure of damages.
42. A class action is superior to all other available
methods for the fair and efficient adjudication of this contro-
versy since joinder of all members is impracticable. Further-
more, as the damages suffered by individual Class members may be
relatively small, the expense and burden of individual litigation
make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in
the management of this action as a class action.
No Safe Harbor
43. The statutory safe harbor provided for forward-
looking statements under certain circumstances does not apply to
any of the false statements pleaded in this complaint. The
specific statements pleaded herein, were met identified as
"forward-looking statements" when made. Nor was it, stated with
respect to any of the statements forming the basis of this
complaint that actual results "could differ materially from those
projected." To the extent there were any forward-looking
statements, there were no meaningful cautionary statements
identifying important factors that could cause actual results to
differ materially from those in the purportedly forward-looking
statements. Alternatively, to the extent that the statutory safe
harbor does apply to any forward-looking statements pleaded
herein, defendants are liable for those false forward-looking
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statements because at the time each of those forward-looking
statements was made, the particular speaker knew that the
particular forward-looking statement was false, and/or the
forward-looking statement was authorized and/or approved by an
executive officer of Theragenics who knew that those statements
were false when made.
Applicability of Presumption of Reliance:
Fraud-On-The-Market Doctrine
44. At all relevant times, the market for Theragenics
stock was an efficient market for the following reasons, among
others:
(a) Theragenics common stock met the
requirements for listing, and was listed and actively traded on
the NASDAQ National Market and the NYSE, both highly efficient
and automated markets;
(b) As a regulated issuer, Theragenics filed
periodic public reports with the SEC;
(c) Theragenics regularly communicated with
public investors via established market communication mechanisms,
including through regular disseminations of press releases on the
national circuits of major newswire services and through other
wide-ranging public disclosures, such as communications with the
financial press and other similar reporting services; and
(d) Theragenics was followed by several
securities analysts employed by major brokerage firms who wrote
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reports which were distributed to the sales force and certain
customers of their respective brokerage firms. Each of these
reports was publicly available and entered the public
marketplace.
45. As a result, the market for Theragenics common
stock promptly digested current information regarding Theragenics
from all publicly available sources and reflected such
information in Theragenics's stock price. Under these
circumstances, all purchasers of Theragenics shares during the
Class Period suffered similar injury through their purchase of
shares at artificially inflated prices and a presumption of
reliance applies.
FIRST CLAIM
(Violations Of Section 10(b) Of The Exchange Act
And Rule 10b-5 Promulgated Thereunder Against
All Defendants)
46. Plaintiff repeats and realleges each and every
allegation contained above as if fully set forth herein.
47. During the Class Period, Theragenics and the
Individual Defendants, and each of them, carried out a plan,
scheme and course of conduct which was intended to and,
throughout the Class Period, did: (i) deceive the investing
Public, including plaintiff and other Class members, as alleged
herein; (ii) artificially inflate and maintain the market price
of Theragenics securities; and (iii) cause plaintiff and other
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members of the Class to purchase Theragenics common stock at
inflated prices. In furtherance of this unlawful scheme, plan
and course of conduct, defendants, and each of them, took the
actions set forth herein.
48. Defendants (a) employed devices, schemes, and
artifices to defraud; (b) made untrue statements of material fact
and/or omitted to state material facts necessary to make the
statements not misleading; and (c) engaged in acts, practices,
and a course of business which operated as a fraud and deceit
upon the purchasers of the Company's securities in an effort to
maintain artificially high market prices for Theragenics's
securities in violation of Section 10(b) of the Exchange Act and
Rule 10b-5. All defendants are sued either as primary
participants in the wrongful and illegal conduct charged herein
or as controlling persons as alleged below.
49. In addition to the duties of full disclosure
imposed on defendants as a result of their making of affirmative
statements and reports, or participation in the making of
affirmative statements and reports to the investing public, the
defendants had a duty to promptly disseminate truthful
information that would be material to investors in compliance
with the integrated disclosure provisions of the SEC as embodied
in SEC Regulation S-X (17 C.F.R. Sections 210.01 et seq.) and
Regulation S-K (17 C.F.R. Sections 229.10 et seq.) and other SEC
Regulations, including accurate and truthful information with
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respect to the Company's operations, financial condition and
earnings so that the market price of the Company's common stock
would be based on truthful, complete and accurate information.
50. Theragenics and the Individual Defendants,
individually and in concert, directly and indirectly, by the use,
means or instrumentalities of interstate commerce and/or of the
mails, engaged and participated in a continuous course of conduct
to conceal adverse material information about the business,
operations and future prospects of Theragenics as specified
herein. These defendants employed devices, schemes, and
artifices to defraud, while in possession of material adverse
non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure
investors of Theragenics's value and performance and continued
substantial growth, which included the making of, or the
participation in the making of, untrue statements of material
facts and omitting to state material facts necessary in order to
make the statements made about Theragenics and its business
operations and future prospects in the light of the circumstances
under which they were made, not misleading, as set forth more
particularly herein, and engaged in transactions, practices and a
course of business which operated as a fraud and deceit upon the
purchasers of Theragenics common stock during the Class Period.
51. Each of the Individual Defendants' primary
liability, and controlling person liability, arises from the
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following facts: (i) the Individual Defendants were high-level
executives and/or directors at the Company during the Class
Period and members of the Company's management team or had
control thereof; (ii) each of these defendants, by virtue of his
or her responsibilities and activities as a senior officer and/or
director of the Company was privy to and participated in the
creation, development and reporting of the Company's internal
budgets, plans, projections and/or reports; (iii) each of these
defendants enjoyed significant personal contact and familiarity
with the other defendants and was advised of and had access to
other members of the Company's management team, internal reports
and other data and information about the Company's finances,
operations, and sales at all relevant times; and (iv) each of
these defendants was aware of the Company's dissemination of
information to the investing public which they knew or recklessly
disregarded was materially false and misleading.
52. The defendants had actual knowledge of the
misrepresentations and omissions of material facts set forth
herein, or acted with reckless disregard for the truth in that
they failed to ascertain and to disclose such facts, even though
such facts were available to them. Such defendants' material
misrepresentations and/or omissions were done knowingly or
recklessly and for the purpose and effect of concealing
Theragenics's operating condition and future business prospects
from the investing public and supporting the artificially
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inflated price of its securities. As demonstrated by defendants'
overstatements and misstatements of the Company's business,
operations and earnings throughout the Class Period, defendants,
if they did not have actual knowledge of the misrepresentations
and omissions alleged, were reckless in failing to obtain such
knowledge by deliberately refraining from taking those steps
necessary to discover whether those statements were false or
misleading.
53. As a result of the dissemination of the materially
false and misleading information and failure to disclose material
facts, as set forth above. The market prices of Theragenics
securities were artificially inflated during the Class Period.
In ignorance of the fact that market prices of Theragenics's
publicly-traded securities were artificially inflated, and
relying directly or indirectly on the false and misleading
statements made by defendants, or upon the integrity of the
market in which the securities trade, and/or on the absence of
material adverse information that was known to or recklessly
disregarded by defendants but not disclosed in public statements
by defendants during the Class Period, plaintiff and the other
members of the Class acquired Theragenics's securities during the
Class Period at artificially high prices and were damaged
thereby.
54. At the time of said misrepresentations and
omissions, plaintiff and other members of the Class were ignorant
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of their falsity, and believed them to be true. Had plaintiff
and the other members of the Class and the marketplace known of
the true financial condition and business prospects of
Theragenics, which were not disclosed by defendants, plaintiff
and other members of the Class would not have purchased or
otherwise acquired their Theragenics securities during the Class
Period, or, if they had acquired such securities during the Class
Period, they would not have done so at the artificially inflated
prices which they paid.
55. By virtue of the foregoing, defendants have
violated Section 10(b) of the Exchange Act, and Rule 10b-5
promulgated thereunder.
56. As a direct and proximate result of defendants'
wrongful conduct, plaintiff and the other members of the Class
suffered damages in connection with their purchases of the
Company's securities during the Class Period.
SECOND CLAIM
(Violation Of Section 20(a) Of The Exchange Act
Against Individuals Defendants)
57. Plaintiff repeats and realleges each and every
allegation contained above as if fully set forth herein.
58. The Individual Defendants acted as controlling
persons of Theragenics within the meaning of Section 20(a) of the
Exchange Act as alleged herein. By virtue of their high-level
positions, and their ownership and contractual rights,
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participation in and/or awareness of the Company's operations
and/or intimate knowledge of the Company's expansion plans and
implementation thereof. The Individual Defendants had the power
to influence and control and did influence and control, directly
or indirectly, the decision-making of the Company, including the
content and dissemination of the various statements which plain-
tiff contends are false and misleading. The Individual
Defendants were provided with or had unlimited access to copies
of the Company's reports, press releases, public filings and
other statements alleged by plaintiff to be misleading prior to
and/or shortly after these statements were issued and had the
ability to prevent the issuance of the statements or cause the
statements to be corrected.
59. In particular, each of these defendants had direct
and supervisory involvement in the day-to-day operations of the
Company and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to
the securities violations as alleged herein, and exercised the
same.
60. As set forth above, Theragenics and the Individual
Defendants each violated Section 10(b) and Rule 10b-5 by their
acts and omissions as alleged in this Complaint. By virtue of
their positions as controlling persons, the Individual Defendants
are liable pursuant to Section 20(a) of the Exchange Act. As a
direct and proximate result of defendants' wrongful conduct,
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plaintiff and other members of the Class suffered damages in
connection with their purchases of the Company's common stock
during the Class Period.
WHEREFORE, plaintiff prays for relief and judgment, as
follows:
(a) Determining that this action is a proper
class action, designating plaintiff as Lead Plaintiff and
certifying plaintiff as a class representative under Rule 23 of
the Federal Rules of Civil Procedure and their counsel as Lead
Counsel;
(b) Awarding compensatory damages in favor of
plaintiff and the other Class members, against all defendants,
jointly and severally, for all damages sustained as a result of
defendants' wrongdoing, in an amount to be proven at trial,
including interest thereon;
(c) Awarding plaintiff and the Class their
reasonable costs and expenses incurred in this action, including
counsel fees and expert fees; and
(d) Such other and further relief as the Court
may deem just and proper.
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JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
DATED: January 22, 1999
/s/
By: _________________________
Martin D. Chitwood
Georgia Bar No. 124950
John O'Shea Sullivan
Georgia Bar No. 691305
Chitwood & Harley
1230 Peachtree Street
Suite 2900
Atlanta, Georgia 30309
(404) 873-3900
Leonard Barrack
Gerald J. Rodos
Barrack Rodos & Bacine
3300 Two Commerce Square
2001 Market Street
Philadelphia, PA 19103
(215) 903-0600
Attorneys for Plaintiff
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Source: Scanned paper copy of court-stamped document