The original complaint charges NPS and certain of its officers and directors with violations of the Securities Exchange Act of 1934. NPS engages in the discovery, development, and commercialization of small molecules and recombinant proteins. Specifically, the complaint alleges that during the Class Period, defendants made false and misleading statements regarding the Company's business and prospects, including the potential for success of PREOS, its full-length human parathyroid hormone (PTH) drug candidate being developed for the treatment of osteoporosis. As a result of these false statements, NPS stock traded at inflated levels during the Class Period, whereby the Company was able to sell 7 million shares of NPS stock for proceeds of more than $79 million.
According to the complaint, the true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) contrary to defendants' positive claims concerning the PaTH study on August 10, 2005, the results in fact evidenced that PREOS was no different from Fosamax in bone density and fracture results; (b) there was a very narrow market for PTH drugs (like PREOS and its competitor Forteo): namely, patients with severe spinal osteoporosis who had also suffered a fracture; (c) on or before August 2, 2005, defendants were notified that a major study performed by a lead researcher in the field who had reviewed all PREOS study results had concluded that further studies were necessary to determine the efficiency of PREOS, if any, in humans; (d) unlike other bone density drugs/products which can be used for hip fracture risk reduction, PREOS, assuming it received FDA approval, could not be prescribed for this use - a key market for bone density drugs; (e) the Center of Medicare Services of Health and Human Services had ruled that injectable drugs for osteoporosis, like PREOS's competitor Forteo, would be reimbursable only for patients who had suffered a fracture, which indicated that the market for a drug like PREOS was limited to a small subgroup of osteoporosis patients who had suffered a fracture while on an existing oral drug; (f) defendants were also aware that physicians would never recommend PREOS except in all but the rarest cases, since the Physician Desk Reference on drugs recommended Forteo (and hence, injectable parathormone drugs like PREOS also) for second line use in osteoporosis after failure of oral drugs like Fosamax and for a maximum of 24 months, which limitations on physician use narrow the medical indication for parathormone drugs like PREOS; and (g) the combination of these facts added up to a huge hurdle to market success for PREOS because the very drug that was the baseline precursor drug for osteoporosis, Fosamax, had already been shown to be as effective as PREOS in the PaTH studies. These facts about PREOS, including the limited reimbursement for the family of parathormone drugs, were critical to understanding the very difficult prospects for FDA approval and market success for the drug.
On July 12, 2006, the plaintiff filed a Corrected Class Action Complaint. On September 18, 2006, the Court entered the Order granting the motion to consolidate the cases. According to the Order, the caption of the consolidated cases shall be In re NPS Pharmaceuticals, Inc. Securities Litigation" and the files of this action shall be maintained in one file under Master File No. 2:06-CV-570 PGC. On November 17, 2006, the Court entered the Memorandum Decision and Order Appointing Lead Plaintiff and Approving Lead Plaintiff's Selection of Counsel. On January 16, 2007, a Consolidated Amended Complaint was filed. On March 19, 2007, the Defendants responded by filing a motion to dismiss the Consolidated Amended Complaint. On July 3, 2007, Judge Paul G. Cassell denied the motion.
On November 1, 2007, lead plaintiff filed its motion to certify the class of shareholders that it seeks to represent in the action. On March 21, 2008 the case was stayed pending mediation between the parties. On February 24, 2009, the parties executed a Stipulation of Settlement finalizing the terms of the settlement, subject to final court approvals following notices to shareholders and members of the settlement class. On March 12, 2009, the court issued the Order granting the plaintiff’s motion for certification and Preliminary Order approving the Stipulation of Settlement.
According to a press release dated April 10, 2009, a settlement of the above-captioned action in the amount of $15,000,000 (fifteen million U.S. dollars) in cash has been reached, subject to final court approval. a hearing will be held before the Honorable Judge Dale A. Kimball, United States District Judge in the United States District Court for the District of Utah, 350 South Main Street, Salt Lake City, Utah 84101-2180, at 3:00 P.M., on June 18, 2009 to determine, among other things, whether the proposed settlement should be approved as fair, reasonable, and adequate, and to consider the application of plaintiff 's counsel for attorneys ' fees and reimbursement of costs and expenses.
On June 19, 2009, the Court entered the Final Judgment and Order signed by Judge Dale A. Kimball approving the final settlement and dismissing the action with prejudice. The Court also approved the plan of allocation and the award of attorney’s fees and expenses.
On November 3, 2009, the Court issued an Order authorizing the distribution of the Net Settlement Fund.