The full 123 page behemoth is here (7 Mb PDF file), but this opening succinctly states the case against Schering-Plough’s former C level executive management:
. . . .During the Relevant Period (April 1, 2006 through June 30, 2008), Schering-Plough was emerging from a dark period in the Company’s history. It had been plagued by criminal and civil liabilities in connection with illegal sales and marketing programs, SEC violations, abysmal manufacturing processes that lead to nearly $1 billion in fines, civil liabilities and an onerous Consent Decree with the FDA.
2. Each of the 14 members of the Schering Board of Directors knew, from Schering’s recent history, the importance to a pharmaceutical company of maintaining transparency and ethical conduct. They also knew to a certainty the following facts:
▲ The cholesterol-lowering drugs VYTORIN and its component ZETIA were far and away the Company’s number one product, earning a significant percentage of the Company’s revenue and growing;
▲ Information tending to show the inefficiency of VYTORIN/ZETIA in improving the health of patients by reducing or slowing the progression of arterial plaque was material information that must be disclosed to investors.
▲ The clinical trial known as ENHANCE was required to test exactly that hypothesis.
▲ Share prices of competitor companies plying drugs in the cholesterol-lowering market were highly sensitive to disclosures of their clinical trial results.
▲ The Company had publicly announced that the results of the completed ENHANCE study would be announced at the March 2007 American College of Cardiology Convention, but then refused to disclose them, and then promised they would be announced at the November 2007 American Heart Association Convention and then again refused to disclose them.
▲ There was great public interest in the medical community and public media about the ENHANCE results and increasing skepticism about why Schering kept missing deadlines for the release of those results.
▲ The Company was promoting a message regarding cholesterol, “Lower is Better,” that it was simultaneously claiming could not yet be verified.
▲ Insiders in the Company, including CEO and Chairman of the Board, Fred Hassan, and Executive Vice President and President of the Company’s Global Pharmaceutical Business, Carrie Cox, had reliable information from data analyses of ENHANCE that plausibly showed VYTORIN was ineffective; in other words the results had been “functionally” although not technically de-blinded and known.
3. Nevertheless, in a blatant display of reckless and disloyal behavior in bad faith breach of their fiduciary duties to the Company, each Board member sat idly by and did nothing to prevent and actually ratified the insider scheme to suppress the negative results of the ENHANCE trial from the medical community, patients, regulators and investors for between fifteen and twenty-one months, making a mockery of Schering’s newly-dubbed motto “earn trust every day.”
4. The Board’s complicity with the Schering Officers resulted in catastrophic damage to the Company, including a 41% drop in share price from its high during the Relevant Period of $33.81 from May 23, 2007 to $13.83 on April 2, 2008, when the fall truth was finally revealed, a loss in market capitalization, a rash of states attorneys general. Department of Justice and FDA investigations, class action lawsuits by patients or payors seeking reimbursement for payments for an ineffective product, securities class actions by investors, ERISA class actions by employees, insider trades of approximately $40 million and the expenditure of hundreds of millions of dollars in fines and attorneys’ fees. . . .
6. This action is brought by Plaintiff on behalf of Nominal Defendants, New Merck, its predecessor corporation Schering, and all shareholders of New Merck and Schering against the former Schering Board of Directors (the “Board”)” and certain of its former executive Officers, seeking to remedy Individual Defendants’ breaches of their fiduciary duties of loyalty, candor, and good faith, waste of corporate assets, and unjust enrichment. . . .
Fascinating. Director Hans Becherer (Compensation Committee Chair), and officers Bob Bertolini (Ex-CFO), Tom Sabatino (Ex-GC) and Raul Kohan (Ex-EVP) are also personally named in the fully-revamped and newly amended federal lawsuit.