Schering-Plough To Pay $165 Million To Shareholders For Clarinex Delay
This article was originally published in The Pink Sheet Daily
Executive Summary
The company is settling claims it failed to reveal that negative FDA inspection reports would delay approval of its allergy medicine.
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Schering-Plough has agreed to fork over $165 million to settle a shareholder class action resulting from the delay in FDA approval of its allergy drug Clarinex eight years ago. The litigation arose after FDA found manufacturing deficiencies at four Schering facilities. Schering announced in February 2001 that FDA would not approve its new drug application for Clarinex (desloratadine) until the company was in compliance with good manufacturing practices (1 (Also see "Schering-Plough Clarinex NDA Approval Awaits Resolution Of GMP Problems" - Pink Sheet, 19 Feb, 2001.), p.3). Several shareholder suits were subsequently filed alleging that Schering delayed disclosing the alleged severity of the manufacturing issues and the risk that FDA would hold up approval of Clarinex. The plaintiffs are investors who purchased shares of Schering stock from May 9, 2000, through Feb. 15, 2001. FDA had deemed Clarinex, a successor to Claritin , approvable in January 2001. It was approved in December 2001. The drug had global sales of $790 million in 2008. The shareholder suits were consolidated in the U.S. District Court for the District of New Jersey in October 2001, and the court certified the class two years later. Schering noted in its 10-K filing with the Securities and Exchange Commission that the court granted preliminary approval of a settlement agreement on Feb. 18 and that the agreement is to be presented for final approval at a hearing on June 1. Schering did not divulge the sum of the settlement in the Feb. 27 filing but included it in a "frequently asked questions and answers" investor document on its Web site. The company said it did not admit liability and that the proposed settlement is covered by insurance and existing reserves. A related ERISA (Employee Retirement Income Security Act) class action, in which participants in an employee savings plan seek damages for losses relating to Clarinex, is pending in district court. The resolution of the shareholder suit is one less thing the company has to contend with as it contemplates its proposed merger with Merck, which was announced a week ago (2 (Also see "Merck/Schering: The Next Wave Of Consolidation" - Pink Sheet, 16 Mar, 2009.), p. 11). The company still faces shareholder security class actions and consumer fraud claims relating to Vytorin (ezetimibe/simvastatin) and Zetia (ezetimibe), its cholesterol joint venture products with Merck. The shareholder suits allege false and misleading statements and omissions concerning the ENHANCE study results. Unfavorable results of the trial, which compared Vytorin to simvastatin alone in preventing atherosclerosis, were released almost two years after the study was completed. - Brenda Sandburg ([email protected]) |