Dura a Dud Again

Judge Harvey Bartle III (E.D. Penn.) has finished evaluating Defendants’ motions to dismiss in the Vicuron Pharmaceuticals securities class action. In denying their requests to toss the 1933 and 1934 Act claims against the company and its officers and directors, the court evaluated the shareholders’ claims that “defendants made numerous materially false and misleading statements concerning anidulafungin,” a drug “in development for the treatment of esophageal candidiasis (‘EC’).”

The court had little trouble finding intent as “anidulafungin was Vicuron's lead product in development, which in itself supports a finding of scienter for alleged misrepresentations as to it.” As for loss causation, Judge Bartle recognized that Dura held that “artificial inflation itself is not enough.” But that didn’t help Defendants, as the judge found that “loss causation has been adequately pleaded” because Plaintiffs alleged (1) that "as a result of the partial disclosure by the Company of the FDA letter, including the shocking news regarding the lack of support for a label claim for EC, the price of Vicuron plummeted," (2) that "when investors were informed of the implications of the 'approvable letter', the true impact of the relapse rate data and the unproven superiority of anidulafungin in the treatment of refractory disease, the market price of Vicuron stock collapsed," and (3) that “the amended complaint also specifically states that plaintiffs and other members of the Class were deceived and caused to purchase Vicuron securities at inflated prices and to sustain damages."

Finally, the court rejected Defendants’ sound-in-fraud argument, which attempted to apply Rule 9(b) to the 1933 Securities Act claims. Judge Bartle held that “plaintiffs have drafted this claim without reference to any mental state,” and “while the amended complaint specifically incorporates the foregoing paragraphs into the § 11 claim, it also reads: ‘Plaintiffs for the purposes of this claim, disclaim any allegations of fraud.’”

You can read In re Vicuron, issued July 5, 2005, at 2005 U.S. Dist. LEXIS 15613.

Nugget: “In the amended complaint, plaintiffs have emphasized certain text of excerpted portions in bold and italicized lettering. We interpret the distinction to indicate that the emphasized portions are what plaintiffs claim to be actionable. We will read the plain text portions as simply context for the emphasized portions.”