NEW YORK — Corporate officers of pharmaceutical drug giant Pfizer Inc. knew that they were misrepresenting the status of two of Pfizer’s new drugs because they were in possession of information that the drugs had unfavorable results in three clinical studies, a federal judge ruled July 1 in granting in part and denying in part the defendants’ motion to dismiss a class action (In re Pfizer Inc. Securities Litigation, No. 04-9866, S.D. N.Y.).
Shareholder Teachers’ Retirement System of Louisiana (TRSL) filed a class action lawsuit on behalf of all purchasers of Pfizer common stock from Oct. 31, 2000, to Oct. 19, 2005, in the U.S. District Court for the Southern District of New York. TRSL alleges that Pfizer, Chief Executive Officer Henry McKinnell and corporate officers John LaMattina, Karen Katen and Joseph M. Feczko violated Sections 10(b), 18, 20(a) and 20A of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 by issuing a series of false and misleading statements concealing the adverse results of three clinical studies concerning Pfizer drugs Celebrex and Bextra. Claims for common-law fraud and violation of state securities laws were also made by a subclass.
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The defendants moved to dismiss the action, and TRSL moved to strike certain exhibits and portions of the memorandum in support of the motion to dismiss. In granting the motion to dismiss in part and denying it in part, Judge Laura Taylor Swain held that the shareholders have properly shown that the clinical studies “revealed that Celebrex and Bextra were linked to adverse cardiovascular events to a statistically significant degree, and that these results were known to Defendants.”
Judge Swain also found that the shareholders have properly shown that the defendants knew that their statements were false and/or misleading at the time that they were made because they “knew or had access to information showing that their public statements were inaccurate.” Moreover, Judge Swain ruled that TRSL’s Rule 10b-5 “allegations are not preempted by the [FDA] and do not rely improperly on group pleading.”
Judge Swain, though, rejected TRSL’s Section 10(b) argument regarding the defendants’ market manipulation “because Plaintiffs allege nothing more than misrepresentation or omissions.” Furthermore, Judge Swain held that dismissal of TRSL’s Section 20(a) claim for control-person liability is not proper because TRSL has properly alleged “a securities violation by Pfizer, control of Pfizer by these defendants, and culpable participation in the fraud.”
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