A New York federal judge has given final approval to a $55 million settlement by Intercept Pharmaceuticals Inc. in multidistrict litigation (MDL) brought by investors accusing the company of securities fraud by concealing a liver drug’s side effects. The recovery for individuals will depend on variables, including the number of Intercept shares purchased, but the estimated average distribution per share of Intercept stock will be about $48.27. This is before deductions for fees and expenses, according to the declaration filed with the court
U.S. District Judge Naomi Reice Buckwald granted the motion for final approval, noting that more than 20,000 notices about the settlement were sent out and “no objections or opt-outs were received.” The investors’ two proposed class actions, which were consolidated in May 2014, accused Intercept, along with CEO Mark Pruzanski and Chief Medical Officer David Shapiro, of sitting on news that the drug, obeticholic acid, caused “substantial” increases in cholesterol lipids, in order to drive up the value of Intercept’s stock.
In March 2015, Judge Buchwald denied Intercept’s bid to dismiss the multidistrict litigation, finding that the investors provided evidence that the company and its executives knowingly concealed the liver drug’s side effects. She noted in her memorandum and order that Intercept learned from a National Institutes of Health doctor running a clinical trial that the drug had proven effective but also had the side effect of increasing cholesterol. Yet the company only told investors about the good news, and correspondence between the doctor and Intercept’s chief medical officer revealed that the company had misgivings about keeping the information under wraps, according to the judge’s order.
The price of the company’s stock shot up more than 500 percent after Intercept announced the drug’s positive effects in January 2014, but dropped steeply days later when the NIH revealed the patients’ increased cholesterol levels. The class includes those who purchased Intercept stock during two days that month. Plaintiffs’ attorney Tor Gronborg said in his declaration that “the recovery of $27.5 million for each day in the class period is, lead counsel believes, the largest per-class-day recovery in the history of securities litigation.”
The Plaintiffs are represented by Tor Gronborg, Kevin A. Lavelle, David Avi Rosenfeld, Samuel Howard Rudman and Trig Randall Smith of Robbins Geller Rudman & Dowd LLP, and Jeremy Alan Lieberman of Pomerantz LLP. The case is In re: Intercept Pharmaceuticals Inc. Securities Litigation in the U.S. District Court for the Southern District of New York.
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