Supreme Court Declines Review of Ruling in Securities Suit Against Drug Maker

Supreme Court Declines Review of Ruling in Securities Suit Against Drug Maker

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Oct. 7 declined to review a First Circuit U.S. Court of Appeals ruling affirming in part and reversing in part a federal court’s ruling that shareholders in a securities class action lawsuit failed to properly plead their claims in arguing that a pharmaceutical company and others misrepresented a number of facts regarding an iron-replacement drug the company was developing (AMAG Pharmaceuticals Inc., et al. v. Silverstrand Investments, et al., No. 12-1457, U.S. Sup.; See February 2013, Page 17).

Lead plaintiffs Silverstrand Investments, Safron Capital Corp. and Briarwood Investments filed a second amended complaint in the U.S. District Court for the District of Massachusetts on behalf of all purchasers of AMAG Pharmaceuticals Inc. common stock pursuant to or traceable to Securities and Exchange Commission Form S-3/ASR, No. 333-164400, dated Jan. 19, 2010, and prospectus dated Jan. 21, 2010, which were issued in connection with a secondary offering of AMAG stock on Jan. 21, 2010.

The lead plaintiffs allege that AMAG and eight of its officers and directors (collectively, the AMAG defendants), as well as six investment banks that acted as underwriters to AMAG for the offering, issued a series of false and misleading statements and concealed a number of facts concerning a new intravenous iron-replacement drug AMAG was developing and marketing, Feraheme, in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.

SAEs

In particular, the lead plaintiffs contended that the defendants failed to disclose that AMAG had reported 23 post-marketing serious adverse events (SAEs) associated with Feraheme to the Food and Drug Administration, that the offering documents failed to disclose that the FDA had twice declined to approve Feraheme because of safety concerns and that the offering documents failed to disclose that a portion of AMAG’s revenue was derived from “the illegal and misleading marketing practices” identified by the FDA in its warning letter.

The AMAG defendants and underwriter defendants filed separate motions to dismiss, and the AMAG officers and directors moved to strike certain exhibits that were submitted by the lead plaintiffs.

The District Court denied the motion to strike and granted the motions to dismiss, and the lead plaintiffs appealed to the First Circuit, which affirmed in part, reversed in part and remanded.

Petition Filed

The AMAG defendants filed their petition for writ of certiorari in the Supreme Court on June 13.

The question presented is “[t]o survive a motion to dismiss, must a plaintiff asserting a Section 11 claim premised on an alleged violation of SEC regulations plead facts establishing that the allegedly omitted information is material under Basic [Basic Inc. v. Levinson, 485 U.S. 224, 231–32 (1988) [an enhanced version of this opinion is available to lexis.com subscribers]] and Matrixx [Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1324, 2011 U.S. LEXIS 241 (2011) [enhanced version]; See April 2011, Page 5])?”

The lead plaintiffs are represented by Mitchell M.Z. Twersky, Jack G. Fruchter and Ximena R. Shovron of Abraham, Fruchter & Twersky in New York and Ian D. Berg of Abraham Fruchter in San Diego.

The AMAG defendants are represented by Robert B. Lovett, Gilles R. Bissonnette and Karen L. Burhans of Cooley in Boston and John C. Dwyer and Angela L. Dunning of Cooley in Palo Alto, Calif.  The underwriter defendants are represented by Kevin J. O’Connor of Hinkley, Allen & Snyder in Boston and Tariq Mundiya and Sameer Advani of Willkie Farr & Gallagher in New York.

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