According to a press release dated March 11, 2007, on February 14, 2007, Biopure signed an agreement in principle to settle the securities class action litigation pending in U.S. District Court, Massachusetts. Under the settlement, all claims against Biopure and the individual defendants would be dismissed with prejudice. The settlement would have no financial effect on Biopure or any of the individual defendants. The settlement is subject to agreeing upon a formal stipulation of settlement and court approval.
As summarized by the Company’s Form 10-K for the fiscal year ended October 31, 2006, following the announcement in December 2003 that the Company was being investigated by the SEC, Biopure, two outside directors (one a former director), its former Chief Executive Officer, former Chief Technology Officer, former Chief Financial Officer and former Senior Vice President — Regulatory Affairs were named as defendants in a number of similar, purported class action complaints, filed between December 30, 2003 and January 28, 2004, in the District Court by alleged purchasers of the Company’s common stock. Those complaints have since been consolidated in a single action, in regards to Biopure Corporation Securities Litigation. The consolidated complaint claims that the Company violated the federal securities laws based on the same allegations pursued by the SEC. The complaint does not specify the amount of alleged damages plaintiffs seek to recover. It sets forth a class period of April 9, 2003 through December 24, 2003. A Company motion to dismiss was denied. The class has not yet been certified.
The original omplaint alleges that, throughout the Class Period, defendants issued numerous positive statements concerning the progress of its application to the US Food and Drug Administration (FDA) seeking regulatory approval to market Hemopure in the US for patients undergoing orthopaedic surgery. However, by the beginning of the Class Period, the FDA had informed defendants of flaws in the Hemopure application, citing "safety concerns" arising from adverse clinical data submitted as part of the company's application, making FDA approval highly unlikely. Prior to the disclosure of these adverse facts, defendants conducted at least two offerings of Biopure common stock generating millions of dollars in proceeds and certain high-level Biopure insiders sold hundreds of thousands of Biopure common shares to the unsuspecting investing public at artificially inflated prices. Then, on 24 Dec 2003, under the threat of civil litigation by the SEC, defendants stunned the market by announcing that, in fact, the FDA had halted further clinical trials of Hemopure due to safety concerns. Defendants also disclosed that the commercial release of Hemopure in the US would be delayed beyond mid-2004. Market reaction to defendants belated disclosures was swift and severe. On 26 Dec 2003, Biopure common shares lost over 16% of their value to close at
$2.43/share, representing a decline of more than 239% from a Class Period high
of $8.25/share, reached on or about 21 Aug 2003.