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BOSTON - (Mealey's) A federal judge in Massachusetts on April 27 dismissed a putative securities class action stemming from Boston Scientific Corp.'s recalled Taxus and Taxus Express2 stents, saying that the market was aware of problems with the stents' installation balloons failing to deflate or deflating too slowly (In re: Boston Scientific Corporation Securities Litigation, No. 05-11934, D. Mass.).
U.S. Judge Douglas P. Woodlock of the District of Massachusetts said Boston Scientific filed appropriate medical device reports with the U.S. Food and Drug Administration for all "no-deflate failures" involving both stents.
"These were for the most part available on the FDA's website," Judge Woodlock said. "Market awareness is further supported by financial reports and news articles dated April 2004. In addition, it is clear that the market knew of the manufacturing 'fix,' at least as of May 5, the day the FDA approved the Special PMA-S [Pre-Market Approval - Supplement] adopting this 'fix' and posted it online.
"It would have been clear to the market that the stents produced prior to May 5 did not incorporate this manufacturing change. I find no evidence that the disclosures made during the Class Period had any 'material' impact on the Company stock price."
Judge Woodlock said the record contains insufficient evidence of scienter.
"To the contrary, the evidence demonstrates a measured effort, in furtherance of a prudently cautious approach, by a corporation seeking to understand and correct the limitations of a product and to respond with appropriate adjustments," Judge Woodlock said. "Even viewing the evidence in the light most favorable to Plaintiff, the corporate process evidenced in the record establishes a reasonable effort in light of developing information to address, rather than ignore, risks inherent in the launch of a product such as the TAXUS stents."
The suit was brought by the Mississippi Public Employees' Retirement System, which alleged that the company withheld material information and made misleading statements about the stents, which created artificial inflation of the market price of the company's stock in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S. Code Sections 78j(b) and 78t(a).
[Editor's Note: Full coverage will be in the May 6 issue of Mealey's Litigation Report: Emerging Drugs & Devices. In the meantime, the opinion is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #28-100506-022Z. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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For more information, call editor Tom Moylan at 610-205-1120, or e-mail him at email@example.com.