KV Pharmaceutical Moves To Toss Securities Action

KV Pharmaceutical Moves To Toss Securities Action - 7/28/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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KV Pharmaceutical Moves To Toss Securities Action
Jocelyn Allison

Securities Law 360. July 28, 2009
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EXCERPT: KV Pharmaceutical Co. has asked a federal court to dismiss a consolidated securities class action arising from alleged financial misstatements and widespread drug recalls, calling the litigation nothing more than “fraud by hindsight.” In a motion filed Monday in the U.S. District Court for the Eastern District of Missouri, KV said the plaintiffs were asking the court to conclude that company officials must have known their financial statements were misleading, even though the product recalls at issue were not made until months afterward. “Plaintiff fails to allege facts that would raise a strong inference that the company knew that the financial statements were misleading, or were reckless as to their truth or falsity, at the time the financial statements were filed,” the motion said. “While significant product recalls began in the fall of 2008, the last purportedly 'false' financial statement issued by the company, the 10-Q issued in June of 2008, was released months earlier,” KV said. The plaintiffs have failed to allege facts showing that the company's financial statements between June 2004 and June 2008 were materially false or misleading, according to the motion. The company said it disclosed the risks of operating in a highly regulated environment in each of its financial reports. “While plaintiff points to so-called 'warnings' by the FDA, the documents that plaintiff highlights (known as 'Forms 483') were nothing more than observations by inspectors that courts have repeatedly held to be routine correspondence that is immaterial to investors,” KV said. The company also claims that the plaintiffs have failed to show how actual fraud, as opposed to economic losses from product recalls, caused KV's stock price to drop. It was the news of the recalls and suspension of production — not a revelation of prior misstatements — that caused investors' losses, KV argues.

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