According to a press release dated May 22, 2006, AtheroGenics, Inc. (NASDAQ: AGIX), a pharmaceutical company focused on the treatment of chronic inflammatory diseases, announced that each of the securities class action lawsuits filed against the Company and certain of its officers and directors, has been dismissed. The lawsuits had been consolidated and recently transferred to federal court in Georgia. The plaintiffs agreed to dismiss the matters voluntarily, without prejudice, and without any payment or consideration to the plaintiffs or their counsel.
As summarized by the Company’s FORM 10-Q for the quarterly period ended March 31, 2006, purported securities class action lawsuits were filed against AtheroGenics and some of its executive officers and directors in the United States District Court for the Southern District of New York on January 5, 2005 and February 8, 2005 (the "SDNY Actions") and in the United States District Court for the Northern District of Georgia, Atlanta division on January 7, 2005, January 10, 2005, January 11, 2005 and January 25, 2005 (the "NDGA Actions"). Plaintiffs filed separate motions to consolidate these lawsuits in both the Southern District of New York and the Northern District of Georgia on March 7, 2005. In addition, three class members simultaneously moved for appointment as lead plaintiffs in both districts on March 7, 2005. On April 18, 2005, the Honorable Richard J. Holowell ordered the SDNY Actions consolidated under the caption "In re Atherogenics Securities Litigation" (the “SDNY Action”) and appointed lead plaintiff and co-lead counsel. On July 5, 2005, AtheroGenics filed a motion to transfer the SDNY Action to the Northern District of Georgia. On July 14, 2005, the plaintiffs voluntarily dismissed the NDGA Actions. On March 31, 2006, Judge Holowell granted the motion to have the SDNY Action transferred to the Northern District of Georgia.
The first complaint filed in Southern District of New York charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period, which statements had the effect of artificially inflating the market price of the Company's securities.
More specifically, the complaint alleges that defendants violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The class period begins after the Company announced on September 27, 2004, positive interim results for the CART 2 study of its AGI-1067 drug, an anti- inflammatory agent designed to target atherosclerosis, a condition in which fatty plaque deposits clog the arteries leading to the heart, thereby increasing the risk of heart disease and heart attack. The Company reported that the interim results of the CART 2 Phase IIb study demonstrated that AGI- 1067 had effectively reduced plaque deposits by a statistically significant average of 6.4 cubic millimeters, or 3.8%, per patient.
The complaint further alleges that the Company's statements regarding the CART 2 Phase IIb study of AGI-1067 were false and misleading because, among other things: the "interim" results consisted of an arbitrary post-hoc subgroup analysis, which served to eliminate patients from the study who were not likely to have responded well to the drug; and defendants improperly represented that the reported "interim" results of the AGI-1067 clinical program were a reliable indicator of AGI-1067's ultimate effectiveness. In response to defendants' false and misleading statements about the Phase IIb study, AtheroGenics's stock, which had closed at $23.16 on September 27, 2004, almost doubled in overnight trading and hit $43.99 on the morning of September 28, 2004, ultimately gaining 64.1 percent, or $14.84, to close at $38.00 on September 28 on a trading volume of over 28 million shares.
Further, on or about November 22, 2004, however, defendants revealed that final results of the Phase IIb trial indicated that the percentage of regression of plaque in patients using AGI-1067 was only slightly more than half as much as had been reported in the interim results defendants had announced two months earlier, despite the fact that twice as many patients were included in the determination of the final results. The market was stunned, and the stock price began to plummet. Then, on January 3, 2005, the Company announced that it had decided to increase the number of patients in the Phase III study for the drug from 4000 to 6000 patients, that the study would be longer in duration, and that the Company needed to raise more cash to fund the study. On this news, the Company's stock fell again, this time 20% to close at $18.72 on unusually heaving trading. On January 5, 2005, the Company disclosed in a SEC filing that the SEC and NASD had commenced informal inquiries into the Company's September 27, 2004 announcement of interim results of the study.