The original complaint charges Adolor and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Adolor is a development stage biopharmaceutical corporation that discovers, develops and plans to commercialize products to relieve pain while reducing the side effects of currently marketed narcotics. More specifically, the complaint alleges that during the Class Period, defendants disseminated materially false and misleading information regarding Adolor’s flagship product candidate Entereg™ and the clinical trials for Entereg™ for the management of postoperative ileus. The true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) the clinical trial failure in the Entereg™ Phase III 302 study for postoperative ileus was directly related to objective failure of the therapy in certain patient subgroups, particularly those patients treated for simple hysterectomy; (b) additional Entereg™ Phase III clinical trials composed of patient subgroups similar to the 302 study would risk repetition of the same therapy failures; (c) the 302 study failure at the 12 mg dosage was due to therapy failures in certain patient subgroups, particularly those patients treated for simple hysterectomy, and not “limited power” or insufficient numbers of patients in the study as defendants claimed; (d) despite representations to the contrary, defendants were in a position to make meaningful comparisons for the data and results between patient subgroups, for the 302 and 313 studies, from the very beginning of the Class Period; (e) despite defendants’ expressions of disbelief at suggestions by analysts that distinctly different results for certain patient subgroups had somehow impacted the quality of results for the 302 and 313 clinical studies, defendants were fully aware of these differences and that the clinical program was indeed adversely impacted from the very beginning of the Class Period; (f) the Entereg™ Phase III 313 clinical study met the primary efficacy endpoint, at both dosage levels, because it excluded certain patient subgroups already known by defendants prior to the Class Period to produce disappointing results for the treatment of postoperative ileus; (g) the Entereg™ Phase III 308 prospective study was at great risk of failing to achieve statistically significant results for the primary efficacy endpoint, at both dosage levels, because it would include a large number of certain patient subgroups already known to produce disappointing results for the treatment of postoperative ileus; (h) elimination of certain patient subgroups already known to produce disappointing results for the treatment of postoperative ileus from the 313 study created an opportunity to present highly encouraging clinical results to the investment community at the very beginning of the Class Period, while deferring the prospect of disappointing results from the prospective 308 study; and (i) since the Entereg™ Phase III pivotal studies were designed to study two different dosages across a number of patient subgroups in three separate trials, defendants were aware, from the very beginning of the Class Period, that the mixed results within the patient subgroups for the 302 and 313 studies confounded the results, making it difficult for the FDA to approve an Entereg™ NDA based on the prospect of disappointing results from the prospective 308 study.
Further, the complaint alleges that as a result of the defendants’ false statements, Adolor’s stock price traded at inflated prices during the Class Period, causing millions of dollars of damages to the Class. On November 12, 2003, as shares traded at prices as high as $18.14, the Company sold 6,900,000 shares of its common stock for gross proceeds of approximately $119 million. On January 13, 2004, the Company reported shocking news about the third in the series of Phase III clinical trials for the Company’s new drug application submission. On this news, the price of Adolor’s stock plunged 37%, trading as low as $13.73 per share, on an unprecedented volume of 12.7 million shares.
According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, the suit has been consolidated with three subsequent actions asserting similar claims under the caption: In re Adolor Corporation Securities Litigation, No. 2:04-cv-01728. On December 29, 2004, the district court issued an order appointing the Greater Pennsylvania Carpenters’ Pension Fund, as Lead Plaintiff. The appointed Lead Plaintiff filed a consolidated amended complaint on February 28, 2005. That Complaint purported to extend the class period, so as to bring claims on behalf of a putative class of Adolor shareholders who purchased stock between September 23, 2003 and December 22, 2004. The Complaint also adds as defendants the Company’s Board of Directors asserting claims against them and the other defendants for violation of Section 11 and Section 15 of the Securities Act of 1933 in connection with the Company’s public offering of stock in November 2003. The Company and the management and director defendants moved to dismiss the Complaint on April 29, 2005. The plaintiffs responded to the motion to dismiss on June 28, 2005, and the defendants’ reply was filed on August 12, 2005.
On May 11, 2009, the Honorable R. Barclay Surrick signed the Memorandum and Order granting the defendants’ motion to dismiss the Amended Complaint, concluding that the Amended Complaint failed to properly state claims upon which relief could be granted.