According to a press release dated August 21, 2007, a hearing will be held on November 13, 2007 at 10:00 a.m., in Courtroom #5, before the Honorable Katherine S. Hayden at the United States District Court for the District of New Jersey, Frank R. Lautenberg Post Office & U.S. Courthouse, Federal Square, Newark, New Jersey 07101, for the purpose of determining, among other things, whether: (1) the proposed settlement of the claims in the Action for cash consideration totaling $7,000,000 (plus accrued interest) should be approved by the Court as fair, reasonable and adequate; (2) this consolidated action should be dismissed with prejudice; (3) the Plan of Allocation is fair and reasonable and should be approved; (4) the Court can and should certify the Action as a class action for settlement purposes; and (5) the application of Plaintiffs' Counsel for an award of attorneys' fees and reimbursement of costs and expenses incurred in connection with this Action should be granted.
In a press release dated June 7, 2007, Pharmos Corporation (NASDAQ:PARS) announced that on May 31, 2007, its counsel entered into an agreement with plaintiffs' legal counsel to settle several class action lawsuits commenced starting in January 2005 and currently pending in the U.S. District Court for the District of New Jersey. The lawsuits relate to statements purportedly made by Pharmos and its officers regarding the effectiveness of dexanabinol in treating traumatic brain injury. The settlement, which is covered in its entirety by Pharmos' insurance, has been reached with no admission of liability by any party and has been entered into to avoid costly and time consuming litigation by all parties. The parties agreed to seek the required court approvals of the settlement and filed the settlement documents with the Court on June 4, 2007. The settlement is subject to court approval. There is no assurance that the settlement will be approved by the Court.
On November 29, 2005, the defendants filed a motion to dismiss the First Amended and Consolidated Class Action Complaint. On June 29, 2006, the Court entered the Order signed by Judge Katharine S. Hayden denying the defendants’ motion to dismiss.
As disclosed by the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, the Company and certain current officers have been named as defendants in several purported shareholder class action lawsuits alleging violations of federal securities laws. These lawsuits were filed beginning in January 2005 and are pending in the U.S. District Court for the District of New Jersey. These lawsuits assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaints allege generally that the defendants knowingly or recklessly made false or misleading statements regarding the effectiveness of dexanabinol in treating TBI (Traumatic Brain Injury) which had the effect of artificially inflating the price of the Company’s common stock. The complaints seek unspecified damages. These class actions have been consolidated by order of the court and lead plaintiffs and lead plaintiffs’ counsel have been appointed. An amended complaint was filed in September 2005.
The action charges Pharmos and certain of its senior officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The alleged violations stem from the dissemination of false and misleading statements, which had the effect -- during the Class Period -- of artificially inflating the price of Pharmos's shares.
During the Class Period, defendants concealed the fact that Dexanabinol, the company's flagship drug product, in Phase III trials for Traumatic Brain Injury (TBI) trial was not exhibiting materially favorable reaction. Prior to disclosing this information to the public, Pharmos sold $16.75 million worth of stock in a private placement. Furthermore, the Company's CEO sold 20% of his holdings and its President sold almost 50% of his holdings. Such sales occurred after the close of Phase III enrollment and after the six month post-enrollment period concluded. On December 20, 2004, just weeks after insiders sold 400,000 shares of stock, they announced Dexanabinol was not found to be materially effective in Phase III testing. Furthermore, after years of touting the effectiveness of Dexanabinol, the Company abruptly ceased its effort to gain approval for Dexanabinol for TBI.