Taro Pharmaceutical Industries, Ltd. Summary: The original complaint charges defendants with violating sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5, by knowingly or recklessly issuing a series of material misrepresentations to the market during the Class Period. According to the complaint, on July 29, 2004, prior to the market opening, Taro issued a press release announcing that its sales had declined to $49.1 million during the second quarter ended June 30, 2004, a drop of more than 41% compared to Taro's first quarter 2004 sales. The Company also reported a net loss for the quarter of $8.9 million, or $0.31 per share, compared with net income of $14.8 million, or $0.50 per diluted share, for the year-ago quarter. On this news, Taro common shares fell to a low of $18.05 per share before recovering to close at $24.14 per share.
Among other things, the complaint alleges that: (i) many of the Company's largest generic drug wholesale customers were engaging in wholesale-to-wholesale trading activities in excess inventory of generic drug products, including Taro generic drug products, thus artificially inflating demand for and the price of the Company's products; (ii) that the Company's reserves for product returns, rebates, chargebacks and other sales allowances were not adequate and failed to reflect the true operating risks associated with Taro's sales of generic drugs to its wholesale customers far in excess of the actual retail demand for such products; and (iii) based on the foregoing, defendants' opinions, projections and forecasts concerning the Company and its operations were lacking in a reasonable basis at all times.
On August 18, 2005, the Court granted the motion to appoint the International Union of Painters and Allied Trades Industry Pension Funds and Locals 302 and 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Trust to serve as lead plaintiffs. The law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP was appointed Lead Counsel. Ten similar actions were also consolidated.
On April 4, 2007 a Consolidated Amended Complaint was filed against defendants alleging material misstatements that resulted in an 85% decline in share value, from $72.11 per share to $10.88. The complaint levels section 10b and 20 claims against the company as well as three senior level officers.
On May 25, 2007, the defendants filed a motion to dismiss the Consolidated Amended Complaint. Before any ruling on the motion to dismiss, the parties engaged in settlement negotiations and on April 16, 2008, all the actions were discontinued because the parties reached a settlement agreement (in principle). On March 23, 2009, the plaintiffs filed a motion for preliminary approval of settlement. On June 9, 2009, the Court preliminarily approved the settlement. A Settlement Hearing was scheduled for September 10, 2009 to determine if the final settlement should be approved.
On September 15, 2009, Judge Richard M. Berman issued the Final Order and Judgment approving the $10 million settlement. Judge Berman further awarded Lead Plaintiffs' Counsel litigation expenses in the amount of $260,713.25. The settlement is final and the case is now closed.
SIC Code: 2834
Industry: Biotechnology & Drugs
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