Prim Leads Successful Class Action Settlement Against Pharmaceutical Firm
Effort Secures $473 Million Payment on behalf of investors in Schering-Plough
The Massachusetts Pension Reserves Investment Management (PRIM) Board today announced a $473 million settlement of a class action lawsuit against pharmaceutical manufacturer Schering-Plough Corporation. The proceeds of the deal, which will be shared among injured shareholders nationwide, is the largest securities fraud class action settlement ever involving a pharmaceutical company. The settlement was negotiated with Merck & Co., which merged with Schering in 2009, after the lawsuit on behalf of Schering investors was already underway.
“Protecting the assets of the state retirement fund is one of our top priorities,” said Treasurer Steven Grossman, who chairs the PRIM Board. “This settlement sends a clear message that any allegations of wrongdoing will be aggressively pursued and that companies will be held accountable for actions that negatively impact shareholders.”
The settlement stems from allegations that Schering failed to properly disclose disappointing results from clinical testing of an anti-cholesterol drug. PRIM and its co-lead plaintiffs argued that because the release of these results were delayed for over a year, investors were financially harmed when they purchased Schering stock at prices that failed to reflect the disappointing results of the clinical test.
“Material events that impact the long-term value of a company must be disclosed in a timely manner,” Michael Trotsky, CFA, Executive Director and Chief Investment Officer of PRIM. “The settlement is significant because it illustrates our commitment to maximizing shareholder value.”
In 2008, PRIM joined three other retirement systems as co-lead plaintiffs to pursue the case on behalf of all shareholders affected by the alleged fraud. While the case was scheduled to go to trial next month, the parties agreed to the $473 million settlement as a way to resolve the case without going through additional legal proceedings, thereby guaranteeing a recovery for shareholders. This is among the largest 25 securities fraud class action settlements in history.
PRIM’s recovery will be determined based on its pro rata share of the net settlement fund.