According to the press release dated March 29, 2005, Vertex Pharmaceuticals, Inc., announced that the United States District Court for the District of Massachusetts has granted its motion to dismiss a purported class action lawsuit pending before the court against certain of the company's officers and a former employee. In her order dismissing the complaint, United States District Court Judge Patti B. Saris also denied the plaintiffs' motion to supplement the complaint as "futile." No consideration has been exchanged, and neither the plaintiffs nor their counsel will receive any compensation or expense reimbursement from Vertex in connection with the dismissal.
The original complaint charges Vertex and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Vertex is a global biotechnology company focused on the discovery, development and commercialization of breakthrough drugs for a range of serious diseases. The complaint alleges that during the Class Period, defendants artificially inflated the price of Vertex stock by concealing critical material information regarding its p38 mitogen-activated protein kinase (“MAPK”) program, for Vertex development compound VX-745.
Specifically, the complaint alleges the following facts which were known by each of the defendants during the Class Period, but were concealed from the investing public: (a) That p38 MAPK has a varied tissue distribution and is implicated not only in inflammation and arthritis, but also in cellular models for neuronal differentiation and effects, presenting multiple targets and significant drug design challenges, which defendants knew from well before the beginning of the Class Period; (b) That small, highly lipophilic molecules designed as inhibitors of p38 MAPK are at great risk of crossing the blood-brain barrier and of causing neuronal effects; (c) That defendants already knew or should have known what constituted an acceptable absorption, distribution, metabolism and excretion (“ADME”) profile for p38 MAPK inhibitors targeting inflammation and arthritis, as opposed to inhibitor targets for neuronal effects, particularly the desired molecular weight and lipophilicity, as well as the correlation of lipophilicity with the potential for p38 MAPK related neuronal effects; (d) That defendants knew or should have known, as early as 1998, of the importance of lipophilicity in the design of p38 MAPK inhibitors, since they had designed at least one other class of potential inhibitory molecules targeting p38 MAPK, possessing significantly lower lipophilicity; (e) That VX-745, a potential p38 MAPK inhibitor intended to target inflammatory disease, asthma, crohn’s disease and rheumatoid arthritis, was exceptionally lipophilic and thus would be predicted to cross the blood-brain barrier and thus to cause neuronal effects; (f) That once clinical testing of VX-745 had commenced, defendants quietly continued the preclinical testing of VX-745 in secret, despite public assurances that they would not commence clinical development until all preclinical studies were completed; (g) That defendants purposefully delayed the announcement of renewed long-term preclinical studies of VX-745 in animals until announcement of study results to avoid connection of the need for the renewed studies with the October 2000 disclosure of defendants’ problems with the Vertex first-generation drug candidate selection process; (h) That the announcement of the unsuitability of VX-745 as a drug candidate was similarly delayed until two months after completion of the merger with Aurora Biosciences Corp.; and (i) That the failure to disclose the defective nature of the VX-745 program, including but not limited to physical and chemical properties, ADME profile, tests, experiments and preclinical and clinical studies, would prevent investors and Aurora Biosciences Corp. shareholders from learning the extent of the misrepresentations made to them during the Class Period.
The complaint further alleges the announcement on September 24, 2001 of the termination of the VX-745 drug development program caused Vertex’s stock price to drop to as low as $17.74 from its Class Period high of $97.25, on record volume of over 9.8 million shares, causing hundreds of millions of dollars in damages to members of the Class.