According to a press release dated September 10, 2007, Judge Morris E. Lasker of the U.S. District Court for the District of Massachusetts has granted final approval of a $52.5 million settlement in two separate but related securities class actions against Sepracor Inc., a Massachusetts-based pharmaceutical company (NASDAQ:SEPR). The lawsuits arose from Sepracor's alleged concealment of safety concerns surrounding its new antihistamine candidate, Soltara,that was rejected by the FDA for marketing approval in March 2002. The settlement is the third-largest settlement in a securities fraud case against a bio-technology company concerning a drug approval. The suit was maintained by Staro Asset Management, LLC on behalf of a debt class consisting of holders of Sepracor's convertible debt securities, and by Westmont Venture Partners, LLC on behalf of an equity class consisting of holders of Sepracor's common stock, call options and put options.
According to a press release dated April 24, 2007, on April 20, 2007, Sepracor Inc. ("Sepracor") entered into a Memorandum of Understanding (the "MOU"), regarding the settlement of two securities class action lawsuits (the "Class Actions") pending in the United States District Court for the District of Massachusetts (the "Court") against Sepracor and certain of its current and former officers and one director (the "Defendants"). … Under the terms of the MOU, which outlines certain elements of a settlement that will require the execution by all parties of definitive settlement agreement(s), notice to the Plaintiffs and final approval by the Court, Sepracor has agreed with counsel for the lead Plaintiffs to pay or cause to be paid $52.5 million in settlement of the Class Actions. Of this amount, Sepracor will pay a pre-tax amount of approximately $34.0 million and expects that its insurance carriers will pay the remaining $18.5 million. In consideration of this settlement payment, counsel for the lead Plaintiffs has agreed, that the settlement will include a dismissal of the Class Actions with prejudice and a release of claims by the Plaintiffs. The MOU contains no admission of wrongdoing.
According to the Notice of Pendency dated May 12, 2006, on September 8, 2005, the Court entered an order certifying the two cases: In Re Sepracor Inc. Securities Litigation, The Debt Purchasers Action, C.A. No. O2-12235-MEL; and, In Re Sepracor Inc.Securities Litigation, The Equity Purchasers Action, C.A. No. O2-12338-MEL. The two Classes in this case are defined as follows: (a) Class in the Debt Purchaser Action: All persons or entities who purchased the convertible debt securities of Sepracor Inc. (“Sepracor”) between May 17, 1999 and March 6, 2002 inclusive (the “Class Period) and were damaged as a result thereof (the “Debt Class”). The three classes of Sepracor’s debt securities are: (1) the 5% due in 2007, (2) the 5.75% due in 2006, and (3) the 7% due in 2005 (the “Debt Securities”); (b) Class in the Equity Purchaser Action: All persons or entities who purchased the common stock or call options, or who sold put options (“Equity Securities”), of Sepracor on the open market during the Class Period (May 17, 1999 through March 6, 2002, inclusive) and were damaged as a result thereof (the “Equity Class”).
As previously disclosed by Company’s FORM 10-K/A for the fiscal year ended December 31, 2005, the Company and several of its current and former officers and a current director are named as defendants in several class action complaints which have been filed on behalf of certain persons who purchased the Company’s common stock and/or debt securities during different time periods, beginning on various dates, the earliest being May 17, 1999, and all ending on March 6, 2002. These complaints allege violations of the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder by the Securities and Exchange Commission. Primarily they allege that the defendants made certain materially false and misleading statements relating to the testing, safety and likelihood of FDA approval of tecastemizole. On April 11, 2003, two consolidated amended complaints were filed, one on behalf of the purchasers of the Company’s common stock and the other on behalf of the purchasers of the Company’s debt securities. These consolidated amended complaints reiterate the allegations contained in the previously filed complaints and define the alleged class periods as May 17, 1999 through March 6, 2002. In both the debt purchasers' action and equity purchasers' action, the court has granted the plaintiffs' motion for class certification. The parties are currently engaged in discovery.
The first action against Sepracor, Inc., was filed by an institutional purchaser of Sepracor convertible debentures after months of investigation including consultation with an expert. The complaint asserts that the defendants misrepresented and concealed facts concerning its most important product, Soltara, an antihistamine for which the Company had applied for FDA approval. The complaint charges that defendants falsely represented (a) that there was no evidence that Soltara caused cardiac effects; (b) that Soltara had been tested at maximum exposure in patients; and (c) that the FDA had told Sepracor that the safety testing of Soltara was sufficient to allay any concerns about cardiac effects from the drug. The complaint alleges that, contrary to defendants misrepresentations, (a) Soltara had caused potentially fatal cardiac effects in both dogs and rats, as well as a serious liver disorder in dogs, (b) Soltara had not been tested at maximum exposure in patients, and (c) the FDA had not told Sepracor that safety testing of Soltara was sufficient to allay any concerns about cardiac effects from the drug. In addition, the complaint asserts that defendants' representations that they were "confident" that the FDA would approve Soltara by March 2002 were misleading in light of and by reason of the failure to disclose these facts. The complaint further alleges that on March 6, 2002, at the end of the Class Period, defendants disclosed that their prior representations were untrue, and that the FDA had declined to approve Sepracor's application to market Soltara due to the facts defendants had misrepresented. These disclosures caused the market price of Sepracor convertible debt securities to fall precipitously.
On December 4, 2002, a similar, purported class action complaint was filed against Sepracor, Inc. The complaint was filed on behalf of persons who purchased Sepracor common stock during the class period April 14, 2000 to March 6, 2002.