U.S. Judge Nixes Shareholder Suit Against Pfizer Over Failed Drug

February 29, 2008

A U.S. federal judge Thursday granted Pfizer Inc.’s motion to dismiss a shareholder lawsuit that alleged the company hid information and made misleading claims about a failed experimental cholesterol drug in order to prop up its share price.

The plaintiffs had sought to recover losses suffered when Pfizer shares dropped after the company halted development of the drug, torcetrapib, when an independent safety monitoring board found increased deaths, heart attacks and strokes in patients taking the medicine in a clinical trial.

U.S. District Court Judge Lewis Kaplan also dismissed claims against current and former Pfizer officers and directors, including its former chief executive, Hank McKinnell.

The suit was brought by the Uniformed Sanitationmen’s Association Compensation Accrual Fund, which had sought to represent a class of shareholders who had bought Pfizer shares between Jan. 19, 2005 and Dec. 2, 2006.

Pfizer’s research and development chief John LaMattina and chief medical officer Joseph Feczko had also been named in the suit.

The drug, from a new class of medicines designed to raise good HDL cholesterol, had been considered by far the most important in Pfizer’s developmental pipeline.

It was widely anticipated that torcetrapib would one day replace Pfizer’s $12 billion a year cash cow Lipitor — the world’s most widely prescribed drug that lowers bad LDL cholesterol — when it lost patent protection.

On Dec. 2, 2006 however, Pfizer announced it was abruptly stopping all torcetrapib clinical trials based on the recommendation of the independent safety monitors, ending the most expensive late-stage development program in pharmaceutical history.

Plaintiffs claimed that Pfizer intentionally or recklessly made statements that were misleading because they failed to disclose facts that lessened the likelihood that torcetrapib ultimately would prove to be safe and effective.

They also asserted that Pfizer had knowledge or access to information contradicting their public statements.

Judge Kaplan found that the plaintiffs failed to make their case.

“That the information was publicly available when the allegedly misleading statements were made weakens any inference that defendants intended to defraud the market,” Kaplan wrote in his 27-page decision.

He added that “the complaint makes no factual allegations that suggest that Pfizer violated American Heart Association rules in order to spin the results, or that Pfizer designed (earlier) phase II studies to avoid uncovering adverse clinical results.”

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