French pharmaceutical giant Sanofi-Aventis SA has settled a class action lawsuit brought by investors who claim the company withheld information about anti-obesity drug Zimulti’s link to severe psychiatric problems. The company agreed to pay $40 million to settle the case. The agreement, which still requires court approval, comes six months after a New York federal judge certified the class of investors. The court found the lead Plaintiffs’ securities fraud claims were typical of the class as a whole. U.S. District Judge George B. Daniels rejected Sanofi’s argument that the claims did not meet the typicality requirement for class actions. Judge Daniels found that the lead Plaintiffs’ asset managers were closely following financial markets and the financial press at the time Sanofi made the alleged misstatements.
Lawyers for the Plaintiffs said the settlement will help provide timely benefits to class members. A proposed order filed with the court reads:
The principal reason for the settlement is the benefit to be provided to the class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future.
Plaintiffs, led by Hawaii Annuity Trust for Operating Engineers, filed suit in the U.S. District Court for the Southern District of New York in 2007. The amended class action complaint alleged that while seeking regulatory approval for Zimulti in 2006, Sanofi covered up the U.S. Food and Drug Administration’s (FDA) concerns about a link between the drug and a heightened risk of suicidal thoughts. The alleged misstatements were made by Sanofi executives in two earnings calls. The amended complaint states that Sanofi ultimately withdrew its application for Zimulti after the FDA’s advisory committee unanimously recommended that the agency block the drug, causing investors “untold losses.” It was further alleged that this led European regulators to ban sales of the drug.
Zimulti is designed to fight obesity by reducing appetite. During the class period, the Plaintiffs said that analysts forecast that annual sales of the drug could top $4.2 billion by 2011. In opposing class certification, Sanofi argued that the claims failed to meet the requirements for typicality, adequacy, predominance and superiority.
The settlement covers investors who purchased Sanofi American Depository Receipts from Feb. 24, 2006, through June 13, 2007. The Plaintiffs are represented by Tor Gronborg, who is with Robbins Geller Rudman & Dowd in the firm’s San Diego office. The case is In re: Sanofi-Aventis Securities Litigation in the U.S. District Court for the Southern District of New York.
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