Interneuron Pharmaceuticals Says Its Proposed
Redux Settlement Meets Supreme Court Guidelines
for Limited Fund Class Actions
LEXINGTON, Mass.--(BW HealthWire)--June 23, 1999--Interneuron
Pharmaceuticals, Inc. (NASDAQ:IPIC) commented on today's ruling by the
Supreme Court in Ortiz v. Fibreboard, noting that the Court, while overturning
the class action settlement relating to asbestos litigation against Fibreboard,
discussed certain criteria that class actions should meet in order to be certified
as limited fund class actions. The Company believes that the proposed limited
fund class action settlement of its Redux(TM) product liability litigation differs in
numerous important respects from the Fibreboard settlement and that the
Company's settlement meets the Supreme Court's guidelines.
Interneuron intends to file an additional brief with the District Court addressing
the impact of Ortiz on the settlement proposed in its litigation and intends to
vigorously pursue the finalization of its settlement.
Background Information
On September 25, 1998 the U.S. District Court for the Eastern District of
Pennsylvania preliminarily approved a formal agreement to settle all product
liability litigation and claims against the Company related to Redux(TM)
(dexfenfluramine). The Court also conditionally certified a limited fund class
action.
The Court order followed a letter of understanding outlining terms of the
settlement announced on September 3, 1998 and execution of the formal
settlement agreement between the Company and the Plaintiffs' Management
Committee, consisting of attorneys designated by the Court to represent
plaintiffs in the multi-district litigation relating to Redux. A fairness hearing on
the settlement was held between February 25 and March 5, 1999. The
Company is currently awaiting a ruling in this hearing.
Redux was a prescription anti-obesity drug withdrawn from the market in
September 1997 by Interneuron and Wyeth-Ayerst Laboratories, a division of
American Home Products Corporation.
The limited fund class action established by the proposed settlement includes
all persons in the United States who used Redux, and certain other persons
such as their family members, who would be bound by the terms of the
settlement. Membership in the class is mandatory for all persons included
within the class definition.
Under the terms of the proposed settlement, class members asserting claims
against Interneuron will be required to seek compensation only from the
settlement fund, and their lawsuits against Interneuron will be dismissed. By
agreeing to the proposed settlement, Interneuron does not admit liability to any
plaintiffs or claimants.
As previously announced, the settlement agreement requires Interneuron to
deposit a total of $15 million in three installments into a settlement fund. The
first installment of $2 million was deposited into the settlement fund in
September 1998. A second installment of $3 million is to be made after the
settlement agreement is approved by the Court, which would depend upon the
ruling in the fairness hearing. These installments, less certain expenses, will be
returned to Interneuron if the settlement does not become final. A third
installment of $10 million, plus interest, is to be made after the settlement
becomes final.
In addition, the proposed settlement provides for Interneuron to deposit all
remaining and available insurance proceeds related to Redux into the
settlement fund. Interneuron has also agreed to make certain royalty payments
to the settlement fund, in the total amount of $55 million, based upon sales of
Interneuron products and other revenues, over a seven year period after the
settlement becomes final. If, at the end of that seven year period, the amount of
royalty payments made by Interneuron is less than $55 million, the settlement
fund will receive shares of Interneuron stock in an amount equal to the unpaid
balance divided by approximately $7.50 per share. The Company will record
initial charges to operations equal to the estimated fair value of the Company's
obligations under the Settlement Agreement, exclusive of insurance proceeds,
at such time as the Company can determine that it is probable that the
conditions to final settlement have been or will be met. The formal settlement
will not become final until approved by the Court and the time for filing appeals
has passed or all appeals have been exhausted.
Interneuron Pharmaceuticals and its majority-owned subsidiary, Intercardia,
Inc. (Nasdaq:ITRC) are engaged in the development and commercialization of a
portfolio of products and product candidates for central nervous system,
cardiovascular and other disorders, including multiple compounds in late-stage
clinical development.
Except for the descriptions of historical facts contained herein, this press
release contains forward-looking statements that involve risks and uncertainties
that could cause the Company's actual results and financial condition to differ
materially from those anticipated by the forward looking statements. These
risks and uncertainties are set forth in the Company's filings under the
Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk
Factors" and elsewhere, and include, but are not limited to, risks relating to the
Redux-related litigation, including risk relating to the finalization of the proposed
settlement of the product liability litigation; uncertainties relating to clinical
trials and regulatory approvals; need for additional funds and corporate partners;
history of operating losses and expectation of future losses; product liability;
dependence on third parties for manufacturing and marketing; the early stage of
products under development; government regulation, patent risks and
competition.
CONTACT: Interneuron Pharmaceuticals, Inc.
Glenn L. Cooper, M.D., (781) 402-3400
or
William B. Boni, (781) 402-3410
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