Ruling Helps Development-Stage Life Sciences Companies
Philadelphia, Pa. – May 12, 2008 (Lawfuel) – Discovery Laboratories, Inc., a biotechnology company developing Surfactant Replacement Therapies for respiratory diseases, recently achieved a major victory in the federal securities class action In re: Discovery Laboratories Securities Litigation, when an appeals court dismissed the lawsuit in its entirety.
Robert L. Hickok and Gay Parks Rainville, partners with Pepper Hamilton LLP, led the team defending Discovery Labs. The team’s extensive motions to dismiss pointed to voluminous public documents that refuted the plaintiffs’ claims against Discovery Labs.
“Winning this type of litigation is a significant victory for our client,” said Mr. Hickok. “It should also help other biotech start-ups that, like Discovery Labs, fully comply with the securities laws but suffer a set-back in their efforts to obtain regulatory approval of a new medicine. Development-stage companies operate in an uncertain environment. Any bump along the road to regulatory approval can adversely affect their stock price. But, as the courts deciding the claims against Discovery Labs recognized, such bumps, alone, do not signify securities fraud.”
On April 29, 2008, the U.S. Court of Appeals for the Third Circuit affirmed a lower court’s dismissal of the plaintiffs’ 285-paragraph complaint, which alleged that Discovery Labs misled investors about the prospects for regulatory approval of its lead product, Surfaxin®, for the prevention of Respiratory Distress Syndrome in premature infants.
The Third Circuit upheld earlier rulings by the U.S. District Court for the Eastern District of Pennsylvania. The District Court dismissed the plaintiffs’ first amended complaint on November 1, 2006, and the second amended complaint on March 15, 2007. The District Court also dismissed a shareholder derivative action against Discovery Labs on May 1, 2007, but the plaintiffs in that lawsuit did not appeal the court’s decision.
Mary B. Templeton, Senior Vice President and Deputy General Counsel of Discovery Labs, commented, “We are pleased that our counsel on this matter, Pepper Hamilton, has effectively presented our arguments, and that both the District Court and the Third Circuit have recognized the quality of our disclosures and dismissed this lawsuit in its entirety.”
Ms. Rainville noted that “Pepper Hamilton’s extensive experience working with biotech and pharmaceutical clients makes us particularly well-suited to defend these companies when they’re faced with this type of litigation. Because we know and understand the drug development and regulatory approval processes, we can effectively provide the court with the context it needs for fairly assessing the disclosures at issue.”