The original complaint alleges that defendants OSIP, certain officers and/or directors violated Section 11, 12(a)(2) and 15 of the Securities Act of 1933 having caused, allowed or permitted false and materially misleading registration statement and prospectus dated November 10, 2004 to be issued, whereby $445,000,000 of OSIP's stock was sold to the investing public at artificially inflated prices. In addition, defendants 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 about the Company's new anti-cancer drug Tarecva, which failed to disclose and /or misrepresented the following adverse facts, among others, that the defendants knew, at least as early as October 26, 2004 that: (1) the Food and Drug Administration ("FDA") would require that OSIP disclose in it labeling for Tarceva that no survival benefit was observed in the epidermal growth factor receptor ("EGFR")-negative subgroup; and (2) OSIP did not have sufficient data to claim that Tarceva provided a survivability benefit for EGFR-negative patients. As a result of the foregoing, the defendants' positive statements only served to artificially inflate the Company's stock price.
The complaint further alleges that on November 19, 2004, a Piper Jaffray analyst report commented on the FDA's approval of Tarceva and a "surprise" in the labeling of Tarceva. The "surprise" in labeling shows that contrary to the Company's prior representation to the investing public, there is currently no scientifically significant data for OSIP's statement that Tarceva provided a survivability benefit for EGFR-negative patients. The revelation in this analyst report caused OSIP's stock price to drop from $64.25 per share on November 18, 2004 to $58.16 per share on November 19, 2004, on volume of 18,496,800 -- over ten times the previous day's volume. The Company's common stock price continued to drop following the publication of the Piper Jaffray analyst report to $54.22 per share on Monday, November 22, 2004.
On December 16, 2004, two securities class actions were filed in the United States District Court for the Eastern District of New York (the "Court ) on behalf of purchasers and acquirers of
OSI common stock during the period April 26, 2004 through November 22, 2004, inclusive, alleging violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.
On April 22, 2005, the Court consolidated the two related cases as In re OSI Pharmaceuticals, Inc. Securities Litigation , Master File No. 2:04-CV-05505-JS-WDW (the "Litigation), and on December 12, 2005, the Court appointed Matt Brody as Lead Plaintiff, and
approved Lead Plaintiff's selection of Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Lead Plaintiffs Counsel
On February 17, 2006, Lead Plaintiff filed a Consolidated Amended Class Action Complaint for Violations of Federal Securities Laws (the "Complaint ) asserting that the Defendants made misstatements and omissions of material fact in press releases and other public statements concerning OSI's lung cancer drug, Tarceva®, which caused OSI's stock price to be artificially inflated during the Class Period, and permitted OSI to conduct a secondary stock offering in November 2005, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933.
On March 31, 2006, Lead Plaintiff and the Underwriter Defendants executed a Stipulation of Dismissal with prejudice, and without costs.
On April 7, 2006, the Defendants filed a motion to dismiss the Complaint. On May 22, 2006, Lead Plaintiff filed a memorandum in opposition to the motion to dismiss, and Defendants filed a memorandum in reply on June 21, 2006.
On March 31, 2007, the Court issued and entered a Memorandum and Order granting, in part, and denying in part, the motion to dismiss. On May 24, 2007, the Court dismissed with prejudice Lead Plaintiffs Sections 11 and 15 claims under the Securities Act of 1933.
According to a press release dated March 14, 2008, OSI Pharmaceuticals, Inc. announced that it has reached a preliminary agreement to settle a putative class action lawsuit filed on or about December 16, 2004 in the U.S. District Court for the Eastern District of New York against OSI, certain of its current and former executive officers and current and former members of its Board of Directors. Under the terms of the settlement, the pending action will be dismissed with prejudice and without any admission of liability on the part of the Company or any of the individually named defendants. The amount of the settlement is $9 million. Approximately, $500,000 will be paid by OSI, and the balance of the settlement will be paid by OSI insurer. The settlement will have no impact on the Company's 2008 financials. The terms of the settlement are subject to court approval.
On August 22, 2008, District Court Judge Joanna Seybert approved the settlement and the plan of allocation. In addition, Judge Seybert issued the order awarding Lead Plaintiff's Counsel attorney fees of 30% of the Settlement Fund, plus interest thereon as defined in the Stipulation, plus litigation expenses in the amount of $44,603.16. The Court entered the Final Judgment and Order of Dismissal with Prejudice on August 27, 2008.