On October 18, 2006, the Court entered the Final Order and Judgment signed by U.S. District Judge Dana M. Sabraw approving the settlement as set forth in the Stipulation. That day the Court also approved the Plan of Allocation and awarded Lead Counsel reimbursement of expenses in aggregate amount of $104,950.36, Lead Counsel attorneys' fees in total amount of $2,000,000.00 and incentive award of $10,000.00 each for Lead Plaintiffs: Gary Apostolov, William Davidson, Richard Fisher and Simon Del Rosario.
According to a press release dated August 1, 2006, a hearing will be held on October 13, 2006, to determine: (1) whether the settlement of claims in the Action in the amount of eight million dollars ($8,000,000) in cash, plus interest earned or accrued thereon (the "Settlement Fund"), should be approved as fair, reasonable and adequate to all the Parties; (2) whether the proposed Plan of Allocation is fair, reasonable, and adequate; (3) whether the application of Lead Counsel for an award of attorneys' fees and expenses should be approved; (4) whether the application of Lead Counsel for an incentive award for Lead Plaintiffs should be approved; and (5) whether the Action should be dismissed with prejudice as set forth in the Stipulation of Settlement dated as of June 28, 2006 and filed with the Court.
In a press release dated July 31, 2006, Ligand Pharmaceuticals Incorporated announced that it has reached agreement to settle the securities class action litigation filed in the United States District Court for the Southern District of California against the Company and certain of its directors and officers. In addition, the Company has also reached agreement to settle the shareholder derivative actions filed on behalf of the Company in the Superior Court of California and the United States District Court for the Southern District of California.
The settlements, which are subject to court approval, resolve all claims by the parties, including those asserted against Ligand and the individual defendants in these cases. Under the agreements, in exchange for a release of all claims, the Company will pay a total of $12.15 million in cash. The settlement amounts and a portion of the Company's total legal expenses will be funded by the Company's insurance carrier while the remainder of the Company's legal fees incurred will be paid by the Company. As part of the settlement of the state derivative action, the Company has agreed to adopt certain corporate governance enhancements. Neither the Company nor any of its current or former directors and officers has made any admission of liability or wrongdoing. The related investigation by the Securities and Exchange Commission is ongoing and is not affected by the settlements discussed above.
As summarized by the Company’s FORM 10-Q for the quarterly period ended March 31, 2006, several purported class action have been consolidated and lead plaintiffs appointed. A consolidated complaint was filed by the plaintiffs in March 2005. On September 27, 2005, the court granted the Company’s motion to dismiss the consolidated complaint, with leave for plaintiffs to file an amended complaint within 30 days. In December 2005, the plaintiffs filed a second amended complaint again alleging claims under Section 10(b) and 20(a) of the Securities Exchange Act. Defendants filed their motion to dismiss plaintiffs’ second amended complaint in January 2006. No trial date has been set.
The original complaint charges Ligand Pharmaceuticals and certain of its directors and officers with violations of the Securities Exchange Act of 1934. The Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that defendants knew or recklessly disregarded the fact that inventory de-stocking, at the wholesale level, was occurring because the Company was unloading Avinza inventory, which was set to expire, onto wholesalers in order to show strong demand for Avinza and to meet sales expectations that they had set; (2) that overall demand of the Company's products, including Avinza, was down because of inventory de- stocking by wholesalers; (3) that Medicaid prescriptions were increasing and thereby causing the Company to pay excessive amounts of rebates to Medicaid; (4) that the defendants knew or recklessly disregarded the fact that increases in Medicaid rebates were not a one-time occurrence but were a trend that was going to continue to have a negative effect on the overall sales of Avinza; and (5) that as a result of the above, the Company's positive statements concerning its financial outlook was lacking in any reasonable basis when made.
On August 3, 2004, Ligand made two separate and shocking announcements: (1) that its second-quarter loss widened, missing analysts' expectations by a huge margin, and (2) that its independent auditor resigned after a four-year relationship. News of this shocked the market. Shares of Ligand plunged almost 40 percent, or $5.405 per share, to close at $8.175 per share on unusually high trading volume on August 3, 2004.
NOTE: Ligand discovers, develops and markets drugs that address patients' medical needs in the areas of cancer, pain, men's and women's health or hormone-related health issues, skin diseases, osteoporosis and metabolic, cardiovascular and inflammatory diseases.