A biopharmaceutical company announced that it has recently settled a securities class action suit brought against it and some of its current and former directors following allegations of insider trading and stock promotion.
The lawsuit was filed against Galena Biopharma Inc. in the U.S. District Court for the District of Oregon on behalf of all investors who purchased shares in the company during the class period between Nov. 6, 2013 and Feb. 14, 2014, according to a press release. The complaint alleged that the biopharmaceutical firm violated the Securities Exchange Act of 1934. The company develops and commercializes targeted oncology treatments meant to deal with unmet medical needs in an effort to advance cancer care.
The settlement over the charges of federal securities law violations does not include an admission of guilt by Galena, a press release stated. The company and its directors believe the allegations against them are without merit. The decision to settle came in an effort to end potentially lengthy and expensive litigation, according to the company.
“The settlement agreement calls for a $20 million payment to the class.”
How the class action suit came to be
The class action lawsuit was filed against the biopharmaceutical company following allegations that it made false and misleading statements to the investing public in an effort to artificially inflate stock prices. The company had allegedly started a branding and awareness campaign designed to mislead potential investors. This initiative was carried out by an investor relations firm called The DreamTeam Group, that Galena allegedly paid to publish articles using aliases that promoted the company’s stock without explaining who purchased it.
When a report was released alleging this practice of false promotions, the company’s stock dropped 16 percent in a single day, on Feb. 12, 2014. Two days later, in a letter to shareholders, Galena acknowledged that it had employed The DreamTeam Group. This led to another decline for the biopharmaceutical firm’s stock, this time a 14 percent drop to close at $3.73 per share, 50 percent lower than the class period high.
The details of Galena’s settlement agreement
The securities settlement agreement calls for a $20 million payment to the class. The company’s insurers will cover $16.7 million and Galena will pay the rest through a combination of cash and shares. The company also settled derivative litigation. This settlement calls for a payment of $15 million, to be covered by Galena’s insurers, and the cancelation of 1.2 million director stock options. The firm’s insurers will also cover $5 million in plaintiffs’ fees. Galena also agreed to implement changes to its corporate governance policies, practices and protocols.
“We are pleased to have reached an agreement with the plaintiffs and believe that settling the cases at this time is in the best interests of the company and our shareholders,” Mark Schwartz, Galena’s president and CEO stated. “I look forward to closing this chapter for the company and continuing our focused efforts on advancing our clinical development pipeline.”
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or firstname.lastname@example.org.