Stockholder’s purchase stocks for profit gains, not losses. But unfortunately a gain is not always the case, and it leads one to question what went wrong? In recent news the world’s largest pharmaceutical company is being blamed for withholding negative information about a drug, and the company’s shareholders are wanting them to fess up and pay up.
Wyeth is facing a class action by investors claiming the drugmaker hid negative data on Pristiq, an anti-depressant marketed as the first non- hormone menopause treatment.
[one_half] Judge Sullivan said the shareholders had shown they had relied on Wyeth’s alleged misrepresentations, and considered Pristiq particularly important to Wyeth’s overall business.[/one_half]
According to Reuters, a federal judge has granted class-action status to former Wyeth Inc shareholders who accused the company, now part of Pfizer Inc, of misleading them about risks associated with the antidepressant.
The decision was issued by U.S. District Judge Richard Sullivan in Manhattan and is hailed as a victory for the shareholders.
The suit was filed in 2007 by the City of Livonia Employees’ Retirement System. The plaintiffs, led by the Pipefitters Union Local 537 Pension Fund, say Wyeth stock dropped $5.70 after the company disclosed the negative effects publicly. The investors are seeking unspecified damages.
Pfizer, the world’s biggest drug company, acquired Wyeth in 2009, therefore ultimately acquiring this problem as well.
A class action status lets shareholders sue the largest U.S. drugmaker by revenue as a group rather than individually, which could lead to larger recoveries while lowering costs.
Christopher Loder, a Pfizer spokesman, said the company will continue to vigorously defend itself in the case.
“The court’s decision is limited to preliminary procedural issues,” Mr. Loder, said in an e-mailed statement. “The opinion does not address the merits of the case.” He said the company will fight the lawsuit.
Wyeth shares lost more than $7.6 billion of market value on July 24, 2007 after the company said the U.S. Food and Drug Administration would not approve Pristiq to treat “hot flashes” in post-menopausal women until it received information about potential serious heart and liver problems associated with use of the drug.
Shareholders said Wyeth should have revealed adverse effects associated with Pristiq sooner, and that its failure to do so caused its stock price to be inflated during the June 26, 2006 to July 24, 2007 class period.
Pristiq generated $309 million of sales from January to June for New York-based Pfizer, falling short of the “multi-billion dollar potential” that Wyeth Chief Executive Robert Essner had in October 2006 said the drug might have.
Analysts once hoped the drug, whose chemical name is desvenlafaxine, could generate more than $2 billion of annual sales, and help Wyeth withstand the 2010 loss of patent protection for its anti-depression drug Effexor.
Essner and several other former Wyeth officials are also defendants in the case.
Judge Sullivan said the shareholders had shown they had relied on Wyeth’s alleged misrepresentations, and considered Pristiq particularly important to Wyeth’s overall business.
“Under the facts currently before it, including Wyeth’s drug pipeline and the looming expiration of patents concerning other Wyeth drugs, the court concludes that the plaintiffs have sufficiently demonstrated the materiality of the allegedly omitted information,” Sullivan wrote.
Laurie Largent and David Rosenfeld, lawyers for the plaintiffs, did not immediately respond to requests for comment.
The case, which has a Michigan retirement system as the named plaintiff, is City of Livonia Employees’ Retirement System v. Wyeth et al, U.S. District Court, Southern District of New York, No. 07-10329.