A press release dated August 15, 2008 announced that the U.S. District Court for the District of Massachusetts gave final approval to the $50,000,000 settlement in the consolidated securities fraud class-action suit filed against Transkaryotic Therapies, Inc., which was acquired by Shire PLC on July 27, 2005.
According to the latest docket posted, on February 11, 2008, the plaintiffs filed a motion for Order to Preliminarily Approve Settlement. The plaintiffs also filed a Stipulation and Agreement of Settlement. On February 20, 2008, Judge Rya W. Zobel signed the Order granting the motion for preliminary approval and for notice and hearing.
As summarized by Shire plc’s, which acquired Transkaryotic Therapies, Inc. in July 2005, FORM 10-K for the fiscal year ended December 31, 2007, in October 2007, the parties reached an agreement in principle to resolve the Class Action Shareholder Suit, subject to court approval, for $50 million. In February 2008, the Court granted preliminary approval to the settlement. Shire will contribute $27 million toward the settlement and its insurance companies will contribute the remaining $23 million. The $27 million net settlement cost has been provided for within SG&A during the year to December 31, 2007.
As summarized by the same SEC filing, in January and February 2003, various parties filed purported securities fraud class action lawsuits against TKT and Richard Selden, TKT's former Chief Executive Officer, in the United States District Court for the District of Massachusetts. In April 2003, the Court appointed a Lead Plaintiff and Lead Counsel and consolidated the various matters under one matter: In re Transkaryotic Therapies, Inc., Securities Litigation, C.A. No. 03-10165-RWZ. In July 2003, the plaintiffs filed a Consolidated and Amended Class Action Complaint (the "Amended Complaint") against TKT; Dr Selden; Daniel Geffken, TKT's former Chief Financial Officer; Walter Gilbert, Jonathan S. Leff, Rodman W. Moorhead, III, and Wayne P. Yetter, then members of TKT's board of directors; William R. Miller and James E. Thomas, former members of TKT's board of directors; and SG Cowen Securities Corporation, Deutsche Bank Securities Inc., Pacific Growth Equities, Inc. and Leerink Swann & Company, underwriters of TKT’s common stock in prior public offerings. In May 2004, the Court granted in part and denied in part TKT's motion to dismiss. In particular, the Court dismissed allegations against TKT to the extent they arose out of certain forward-looking statements protected by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and dismissed claims based on the public offerings of June 29, 2001 and December 18, 2001. The Court allowed all other allegations to remain. In July 2004, the plaintiffs voluntarily dismissed all claims based on the third public offering dated December 26, 2001. In November 2005, the court granted the plaintiffs’ motion for class certification. On May 23, 2005, the court entered judgment on all claims alleged against SG Cowen Securities Corporation, Deutsche Bank Securities Inc., Pacific Growth Equities, Inc., and Leerink Swann & Company. On June 5, 2006, the court entered judgment on all claims alleged against Messrs. Gilbert, Leff, Moorhead, Yetter, Miller, and Thomas. On November 9, 2006, Mr Geffken filed an Agreement for Judgment on all claims alleged against him. On September 1, 2007 the SEC filed suit against Dr Selden. The case is entitled Securities and Exchange Commission v. Richard B Selden, Civil Action No. 05-11805-NMG (D. Mass.) (“the SEC Action”). The Company is obligated to indemnify Dr Selden for his costs incurred in connection with the SEC Action.
The original complaint alleges that during the Class Period, defendants made misrepresentations and nondisclosures of material fact to the investing public concerning TKTX's prospects for FDA approval for the marketing of TKTX's Replagal enzyme therapy for the treatment of Fabry disease. In fact, the Complaint alleges, defendants knew by virtue of their ongoing communications with the FDA that the FDA considered TKTX's data on the primary pain reduction endpoint of TKTX's Phase II study to be uninterpretable, and further that the FDA considered that TKTX's cardiac and renal data did not support approval. More specifically, according to testimony at the January 14, 2003 Advisory Committee hearing, in a letter dated December 22, 2000, the FDA
had advised TKTX that "the clinical study data (from the Phase II
studies) had not provided substantial evidence of efficiency and fully
detailed the facts leading to that conclusion. (The FDA's Center for
Biologics Evaluation and Research) recommended that additional clinical
studies be conducted." The true facts began to emerge, the Complaint alleges, after the close of the securities markets on October 2, 2002, when TKTX admitted that the FDA had determined that TKTX's data on pain reduction was "uninterpretable," and that TKTX had determined not to rely on that data to seek FDA approval for marketing of Replagal. Rather, defendants stated that TKTX would rely primarily on its data for cardiac and renal improvement in Phase II tests for patients receiving Replagal. However, at the January 14, 2003 Advisory Committee meeting, the FDA further confirmed that it had informed TKTX that the renal and liver data did not support approval as early as December 2000. On January 15, 2003, TKTX closed at $6.49, more than 85% below its Class Period high. Motivation for TKTX to make the materially false and misleading statements during the Class Period is supported by the need to sale $267 million in common stock in secondary public offerings during the Class Period and by substantial insider trading. Defendant Richard F. Selden, for example, was motivated to sell 90,000 shares of his personal holdings of TKTX common stock during the Class Period for total consideration of $2,800,000.