PharmaNet Development Group, the US-based contract research organisation (CRO) hit hard by a spate of project cancellations in its crucial late-stage business, is facing a welter of class-action suits over alleged violations of federal securities laws.
Law firms including Howard G Smith, Coughlin Stoia Geller Rudman & Robbins, The Brualdi Law Firm, Izard Nobel and Dyer & Berens have filed the actions in the United States District Court for the District of New Jersey (the CRO is based in Princeton, NJ) on behalf of shareholders who acquired PharmaNet common stock between 1 November 2007 and 30 April 2008.
The lawsuits allege that statements made by PharmaNet and certain of its executives during that period were “materially false and misleading” because they failed to disclose key factors such as:
– the likelihood that a number of contracts in the CRO’s backlog would be cancelled;
– PharmaNet had ramped up its expenses to fulfil these contracts, despite a strong likelihood that they would be cancelled;
– the company had entered into “highly risky” contracts with pharmaceutical and biotechnology clients.
The actions note that PharmaNet’s share price dropped from US$23.86 to US$17.10 after the CRO announced on 30 April that it was lowering its financial guidance for 2008 to reflect the impact of late-stage cancellations, which it expected to shave around US$30.0 million off projected revenues for the full year.
PharmaNet cut its 2008 outlook for the second time in September, citing mainly the cancellation or postponement of clinical development projects in its late-stage segment and a lower than expected sample volume of early-stage business.
