On December 17, 2007, the Court entered the Order and Final Judgment signed by U.S. District Judge William L. Osteen, Jr. According to the Order, the settlement in the amount of $11,250,000 in cash and the Plan of Allocation is approved. Lead counsel is awarded attorney’s fees in the amount of 30% of the settlement fund and $214,634.31 in reimbursement of expenses.
According to a press release dated July 10, 2007, POZEN Inc., a pharmaceutical company focused primarily on products for the treatment of acute and chronic pain and other pain-related conditions, today announced that is has reached an agreement to amicably settle the consolidated class action lawsuit filed in the United States District Court for the Middle District of North Carolina against POZEN Inc. and its chairman, president and chief executive officer. All claims against the company and its CEO will be dismissed in their entirety without admission of liability or wrongdoing by any party. The settlement agreement, which remains subject to court approval, will be funded entirely with proceeds from the company’s directors and officers’ liability insurance.
According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, five purported class action lawsuits were filed during 2004 by holders of the Company’s securities against the Company and certain of its current and former officers, in the U. S. District Court for the Middle District of North Carolina, alleging violations of securities laws. These actions were consolidated for pre-trial purposes. A lead plaintiff has been appointed by the court and a consolidated amended complaint was filed on December 20, 2004. On January 27, 2005, the Company filed a motion to dismiss the amended complaint. The motion to dismiss was denied on August 30, 2005 and the case is now in discovery phase.
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. According to the complaint, POZEN is a pharmaceutical development company focused on developing a portfolio of drugs for the global migraine market. The Company's lead product candidates included MT 100, a proprietary formulation containing metoclopramide hydrochloride and naproxen sodium; MT 300, a proprietary formulation of dihydroergotamine mesylate in a pre- filled syringe; and MT 400, which is being developed as a co-active acute migraine therapy. The complaint charges the Company with issuing false and misleading statements concerning its migraine drugs MT 100 and MT 300.
More specifically, the complaint alleges that the Company failed to disclose the following adverse facts: (1) that defendants knew or recklessly disregarded the fact that its drugs MT 100 and MT 300 were unsafe and ineffective; (2) that despite knowing these facts, the Company entered into various licensing agreements in order to book revenues and achieve positive cash flows; (3) that as a result of booking revenues and achieving positive cash flows, the defendants were able to manipulate the Company's stock price in order to attain large bonuses, which were tied to the Company's stock price, not the success of the Company's product pipeline; (4) with respect to the drug MT 300, defendants knew or recklessly disregarded the fact that the drug resulted in higher incidences of nausea and vomiting as compared to placebo in two Phase III trials and that the drug failed to show statistical superiority as compared with placebo with regard to controlling symptoms of migraines; (5) with respect to the drug MT 100, defendants knew or recklessly disregarded the fact that MT 100's chances of being approved by the FDA were less than 50% because of concerns about several primary end points, particularly pain response to migraines at two hours, lack of data showing consistent two-hour pain response and symptom relief, and worries about the drug's carcinogenicity; and (6) that MT 100 failed to show superiority to a placebo as measured by a two-hour response and two-hour symptom migraine relief.
The complaint further alleges that the blow to the Company occurred on October 20, 2003, when POZEN announced that it had received a not-approvable letter from the U.S. Food and Drug Administration ('FDA') related to its New Drug Application ('NDA') for MT 300. The letter was issued based on the FDA's conclusion that while MT 300 achieved its primary end point, it failed to achieve statistical significance versus placebo for the relief at two hours of the secondary symptoms of migraine (nausea, sensitivity to light, and sensitivity to sound). On news of this, shares of POZEN fell $5.83 per share, or 32.8 percent, to close at $11.94 per share on unusually high trading volume on October 20, 2003.
The complaint alleges that the final blow to the Company's manipulative scheme occurred on June 1, 2004. Then, POZEN announced that the FDA issued a not-approvable letter on Friday, May 28, 2004 concerning the Company's NDA for MT 100 for the acute treatment of migraine. In the FDA letter, the FDA cited the apparent lack of superiority of MT 100 over naproxen for sustained pain relief, which was the primary end point for the two component studies. Additionally, for the first time the FDA raised an approvability issue concerning the risk of tardive dyskinesia ('TD') presented by the use of metoclopramide, one of the components of MT 100. In this regard, the FDA stated in their letter, 'given the number of patients exposed to MT 100 for at least one year in your database (about 300), the absence of any detected cases is consistent with a true rate of TD of about 1%, an unacceptably high risk in the absence of any demonstrated advantage of the product.' Further, the FDA mentioned that based on animal studies, there may be a potential risk of carcinogenicity, presumably due to metoclopramide. News of this shocked the market. Shares of POZEN fell $3.69 per share, or 37.2 percent, to close at $6.23 per share on unusually high volume.