According to the Company’s Form 10-K for the fiscal year ended December 31, 2005, on November 14, 2005, the United States District Court for the Southern District of New York approved the terms of a settlement between plaintiffs and Regeneron settling all claims against the Company in this lawsuit. The settlement requires no payment by the Company or any of the individual defendants named in the lawsuit. The Company’s primary insurance carrier agreed to make the required payment under the settlement, the amount of which is immaterial to the Company. The settlement includes no admission of wrongdoing by Regeneron or any of the individual defendants. Separately, the plaintiffs and the individual defendants named in the lawsuit entered into a Stipulation of Voluntary Dismissal, which dismissed all claims against the individuals with prejudice.
According to the Notice of Pendency of Class Action and Proposed Settlement dated September 9, 2005, a settlement fund in the amount of $4,700,000 has been established. The Court will hold a Settlement Fairness Hearing at 9:30 a.m. on 14th day, November, 2005, at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, New York, New York 10007-1312. At this hearing the Court will consider whether the settlement is fair, reasonable and adequate. At the Settlement Fairness Hearing, the Court also will consider the proposed Plan of Allocation for the proceeds of the settlement and the motion of Plaintiffs’ Co-Lead Counsel for attorneys’ fees and reimbursement of expenses.
As summarized by the same Notice, a number of other complaints were filed and the actions were subsequently consolidated by the Court under the caption In re Regeneron Pharmaceuticals, Inc. Securities Litigation, Civil Action No. 03 CV 3111 (RWS). On September 9, 2003, the Court appointed Sara and Joseph Katz, Terri D. Carroll, and Stanley D. Bazewicz as Lead Plaintiffs. The Court also approved the law firms of Milberg Weiss Bershad Hynes & Lerach LLP (now known as Milberg Weiss Bershad & Schulman LLP) and Stull Stull & Brody as Plaintiffs’ Co-Lead Counsel. On November 1, 2003, Lead Plaintiffs filed a Consolidated Amended Class Action Complaint (the “Complaint”). On December 23, 2003, the Defendants filed a motion to dismiss the Complaint, which was denied by the Court in its Opinion and Order filed February 3, 2005. On April 7, 2005, the Defendants served their Answer to the Complaint in which they denied all substantive allegations of wrongdoing and asserted a number of affirmative defenses. In March 2005, Lead Plaintiffs and Defendants began pretrial discovery, which has included the exchange of initial disclosures and the production of documents from a number of non-parties, including investment analysts. On June 3, 2005, the parties submitted their dispute to private mediation before retired United States District Judge Nicholas H. Politan. At the conclusion of the mediation, the parties reached a preliminary agreement in principle on the terms of a settlement.
The original complaint charges that defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of materially false and misleading
statements to the market between March 28, 2000 and March 30, 2003.
Regeneron is a biopharmaceutical company that discovers, develops and
intends to commercialize therapeutic drugs for the treatment of serious
medical conditions. During the Class Period, Regeneron initiated Phase
II clinical trials for its diet drug AXOKINE for use in obese patients.
The complaint alleges that the Defendants claimed that AXOKINE would
help patients lose weight better than a placebo over a year. However,
more than two-thirds of the 1,467 patients on the medicine in the
clinical trials developed antibodies to it after three months, which
made the medicine less effective. Patients taking AXOKINE, including
those who developed antibodies, lost an average 6.2 pounds, compared
with 2.6 pounds for those on a placebo, which the Company admits is
similar to results dieters get with already available pills. Before
results were released, defendants had led the public to believe that
AXOKINE would have more than $500 million in annual sales.
On March 31, 2003, Regeneron admitted AXOKINE lost effectiveness in
about 70% of patients in a study. On this news, the biotechnology
company's shares plunged 57%, a market cap loss of more than $500
million. However, even defendants' admission was false, as, in fact,
defendants manipulated the results of the study. In truth, 73.5% of the
patients developed antibodies to the drug. As a result of the
defendants' false statements, Regeneron's stock price traded at inflated
levels during the Class Period, increasing to as high as $40 on December
18, 2000, whereby the Company and its top officers and directors sold
more than $430 million worth of their own securities.