According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2005, on May 9, 2005, the plaintiff dismissed the complaint in its entirety without prejudice. The action is no longer pending.
The complaint alleges that defendants Nektar, and certain of its officers and directors 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 March 5, 2004 and August 4, 2004. More specifically, the complaint alleges that the defendants' statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the defendants knew or recklessly disregarded the fact that Aventis, one of its main partners in Exubera, prematurely filed an application for marketing approval of Exubera in the European Union with the European Medicines Agency for the sole purpose of fending off a takeover bid; (2) that the defendants knew or recklessly disregarded the fact that Exubera was plagued by ongoing safety concerns, including decreases in lung function and build-up of antibodies that could potentially affect drug absorption; (3) that as a result of these safety concerns, the application for marketing approval of Exubera in the European Union was likely to be rejected; and (4) that despite knowing these facts, defendants approved of the filing because Nektar's revenues and growth prospectuses, which are largely based on royalties and manufacturing payments, are entirely dependent on the success of its partners, who are responsible for clinical development and marketing and because the Company was highly leveraged and needed the European Union filing in order to complete a $199.5 million offering.
On August 5, 2004, Reuters published an article entitled 'EU experts have concerns over Exubera drug-report.' Citing a French medical online news service, Reuters stated an unnamed source heard that European regulatory officials wondered whether the drug could win approval. The original story, from Agence de Presse Medicale, also points to official notes from an April meeting of British regulators that mentioned a certain unnamed diabetes drug up for approval was being met with objections. It is believed that drug is Exubera. News of this shocked the market. Shares of Nektar fell $6.14 per share or 37.01 percent on August 5, 2004, to close at $10.45 per share on unusually high trading volume of over 25 million shares.
NOTE: Nektar is a drug delivery products based company that provides a portfolio of technologies that will enable it and its pharmaceutical partners to improve drug performance throughout the drug development process. As of December 31, 2003, Nektar had ongoing collaborations with more than 25 biotechnology and pharmaceutical companies, of which 21 were announced.