The original Complaint alleges 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 material misrepresentations to the market between October
21, 1998 and July 25, 2003.
Specifically, the complaint alleges that on January 23, 2003, the Company shocked investors when it announced that it had overstated its net income by $5 million due to improper accounting from 1997 to 2001, inclusive, and that it would restate its financial results for the five-year period. Moreover, throughout the Class Period, defendants failed to disclose that the SEC had commenced an informal investigation into the Company's improper accounting. Additionally, the complaint alleges that during the Class Period, defendants issued false and misleading statements, including profit warnings, that failed to disclose the loss of a major contract between Cambrex and Transkaryotic Therapies, Inc. ("TKT") to manufacture the drug Replagal(TM) to treat Fabry disease, and the effect of the loss on the Company's financial prospects. Further, the complaint alleges that as early as October 2002, defendants knew that it was
more likely than not that the Company would lose the TKT contract as a result
of FDA concerns with TKT's Replagal application, and that Cambrex would not be
able to adequately and efficiently replace the business resulting from this
likely loss. On January 14, 2003, defendants are alleged to have known that the
loss of the contract was certain when TKT announced the FDA's rejection of the
Replagal application. It was not until April 3, 2003, nearly three months
later, that defendant revised downwards Cambrex's earnings and revenues
guidance to account for the loss of the TKT contract, precipitating a 37
percent drop in the price of Cambrex stock. Defendants never disclosed the TKT
contract and the effect of its cancellation on its financial prospects. The
"mystery contract" only became public knowledge on April 28, 2003 when it was
disclosed by a trade publication. On July 25, 2003, the last day of the Class
Period, defendants conceded during a conference call that they in fact knew
about the loss of the TKT contract when they issued their profit warnings. On
that same day, the market reacted swiftly and dramatically to this news,
causing the price of Cambrex common stock to drop $5.09 or 20 percent from its
previous day's close.
As summarized by the Company’s Form 10-K For The Fiscal Year Ended December 31, 2007, five class action suits were filed with the New Jersey Federal District Court (the "Court"). In January 2004, the Court consolidated the cases, designated the lead plaintiff and selected counsel to represent the class. An amended complaint was filed in March 2004. The lawsuit has been brought as a class action in the names of purchasers of the Company's common stock from October 21, 1998 through July 25, 2003. The complaint alleges that the Company failed to disclose in a timely fashion the January 2003 accounting restatement and subsequent SEC investigation, as well as the loss of a significant contract at the Baltimore facility. The Company filed a Motion to Dismiss in May 2004. Thereafter, the plaintiff filed a reply brief and in October 2005, the Court denied the Company's Motion to Dismiss. The Company continues to believe that the complaints are without merit and will vigorously defend against them. As such, the Company has recorded no reserves related to this matter. The Company has reached its deductible under its insurance policy and further costs, expenses and any settlement are expected to be paid by the Company's insurers. The Company entered into a Memorandum of Understanding regarding the settlement of all claims in this matter. The settlement includes a payment to class members of an amount which is well within the policy limits of, and is expected to be paid by, the Company's insurance. As a result, it is not expected to impact the Company's operating results. Cambrex continues to deny liability in the matter. The settlement is subject to final approval by the Court and entry of an agreed upon Final Judgment. Class members will have the opportunity to either object to the terms of the settlement or to opt out of the class.
On May 6, 2008, District Court Judge Peter G. Sheridan signed the Final Judgment and Order. According to the Order, the settlement in the amount of $3,150,000 in cash was approved and the complaint dismissed with prejudice.