According to a press release dated November 17, 2004, the U.S. District Court for the Eastern District of Pennsylvania issued an order Wednesday granting final approval of a settlement to a class-action lawsuit filed by ViroPharma Inc. stockholders. The settlement calls for payment of $9 million by the Exton, Pa.-based biopharmaceutical company's insurance carriers to the class, without any payment by ViroPharma (Nasdaq:VPHM) or any other defendants, and for dismissal of the action with prejudice.

In a press release dated July 27, 2004, United States District Court for the Eastern District of Pennsylvania has issued an order granting preliminary approval of a settlement of the class action. In March 2004, the Company announced that it had entered into the agreement in principle to settle this litigation. The preliminary settlement calls for payment of $9.0 million by the Company's insurance carriers to the class, without any payment by ViroPharma or the other defendants, and for dismissal of the action with prejudice. The settlement is conditioned on final court approval after notice to the plaintiff class and expiration of the time for appeal from any order of the Court approving the settlement.

The complaint alleges that defendants violated the federal securities laws by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities.

Specifically, the complaint alleges that throughout the Class Period, Defendants made highly positive statements regarding the Company's Drug Picovir. ViroPharma represented that its growth was contingent on U.S. Food and Drug Administration ("FDA") approval of its' Picovir (pleconaril) drug as a cure for the common cold. ViroPharma informed the investing public of every positive part of the Picovir studies. The Company sent numerous press releases praising the effectiveness of Picovir. The Company minimized or concealed potential obstacles to FDA approval. On March 19, 2002 trading was halted as the Company revealed that an FDA advisory committee was deciding the fate of ViroPharma's cold treatment, Picovir. The panel voted 15-0 against approval because of safety concerns.However, during the Class Period, the Company insisted that treatment was well tolerated and that adverse events were comparable to placebo in the trials. On March 20, 2002 after the resumption of trading, shares of ViroPharma plummeted 60 percent. The 15-member FDA committee had questions about the safety of the drug in women taking oral contraceptives and in the elderly. In addition, the committee asked for broader studies on the drug's benefits with minorities, the elderly, patients with asthma and chronic bronchitis, children, and more about the drug's interaction with other medications. They also expressed concern that the drug may develop drug-resistant cold germs. The FDA pointed out that the drug had several significant side effects, with headache the most frequently cited. Seven patients out of 4,500 who took the drug reported rapid heart palpitations and four patients withdrew from the study for that reason. The side effect that most concerned the panel was abnormal bleeding by 3 percent of women taking birth control pills. Because Picovir needs to be taken within the first 24 hours of getting a cold and after eating, several panelists worried that doctors would dole out prescriptions before the cold season began, without discussing safety considerations. There were tremendous obstacles for ViroPharma to overcome before it could receive regulatory approval for Picovir. These obstacles, as enumerated by the FDA as set forth above, were undisclosed during the Class Period, but were well known to defendants by virtue of their testing and trials of this drug on thousands of people for several years.