A federal judge has granted class-action status to former Wyeth Inc shareholders who accused the company, now part of Pfizer Inc, of misleading them about risks associated with the antidepressant Pristiq.
The decision issued Tuesday by U.S. District Judge Richard Sullivan in Manhattan is a victory for shareholders led by the Pipefitters Union Local 537 Pension Fund in Boston.
It lets shareholders sue the largest U.S. drugmaker by revenue as a group rather than individually, which could lead to larger recoveries while lowering costs.
Christopher Loder, a Pfizer spokesman, said the company will continue to vigorously defend itself in the case.
Wyeth shares lost more than $7.6 billion of market value on July 24, 2007 after the company said the U.S. Food and Drug Administration would not approve Pristiq to treat "hot flashes" in post-menopausal women until it received information about potential serious heart and liver problems associated with use of the drug.
Shareholders said Wyeth should have revealed adverse effects associated with Pristiq sooner, and that its failure to do so caused its stock price to be inflated during the June 26, 2006 to July 24, 2007 class period. Pfizer bought Wyeth in 2009.
Pristiq generated $309 million of sales from January to June for New York-based Pfizer, falling short of the "multi-billion dollar potential" that Wyeth Chief Executive Robert Essner had in October 2006 said the drug might have.
Analysts once hoped the drug, whose chemical name is desvenlafaxine, could generate more than $2 billion of annual sales, and help Wyeth withstand the 2010 loss of patent protection for its anti-depression drug Effexor.
Essner and several other former Wyeth officials are also defendants in the case.
Sullivan said the shareholders had shown they had relied on Wyeth's alleged misrepresentations, and considered Pristiq particularly important to Wyeth's overall business.
"Under the facts currently before it, including Wyeth's drug pipeline and the looming expiration of patents concerning other Wyeth drugs, the court concludes that the plaintiffs have sufficiently demonstrated the materiality of the allegedly omitted information," Sullivan wrote.
Laurie Largent and David Rosenfeld, lawyers for the plaintiffs, did not immediately respond to requests for comment.
In morning trading, Pfizer shares fell 3 cents to $23.99.
The case, which has a Michigan retirement system as the named plaintiff, is City of Livonia Employees' Retirement System v. Wyeth et al, U.S. District Court, Southern District of New York, No. 07-10329.
(Reporting By Jonathan Stempel in New York; Additional reporting by Ransdell Pierson; Editing by Sofina Mirza-Reid)