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Alaska Electrical Pension Fund v. Pharmacia Corp.

August 18, 2006

ALASKA ELECTRICAL PENSION FUND, ET. AL., PLAINTIFFS,
v.
PHARMACIA CORPORATION, ET. AL., DEFENDANTS.



OPINION AND ORDER

I. INTRODUCTION

Currently before the Court is a Motion filed by Plaintiffs, Alaska Electrical Pension Fund, et. al. (hereinafter "Plaintiffs"), for leave to take eighty fact depositions in Plaintiffs' securities fraud suit against Pharmacia Corporation, et. al. (hereinafter "Defendants" or "Pharmacia"). In the underlying case, Plaintiffs assert that Defendants violated §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by making materially false and misleading statements between April 17, 2000 and May 31, 2002, (hereinafter "the Class Period") regarding the results of a clinical study of Plaintiffs' product, Celebrex. For the following reasons, the Motion to Grant Leave is DENIED.

II. FACTUAL AND PROCEDURAL BACKGROUND

Pharmacia launched the Nonsteroidal Anti-Inflammatory Drug (hereinafter "NSAID")

Celebrex in February of 1999 for use in reducing inflamation in patients suffering from osteoarthritis or rheumatoid arthritis. (Consolidated Complaint For Violation of the Federal Securities Laws at ¶ 2)(hereinafter "Complaint"). At that time, the NSAIDs aspirin, ibuprofen, and diclofenac were commonly used to treat arthritis. (Id.). However, medical studies associated long-term use of those medications with a variety of gastrointestinal problems (Id.).

According to Plaintiffs, Pharmacia distinguished Celebrex from other NSAIDs by marketing the medication as an effective arthritis treatment that did not produce adverse gastrointestinal side effects, thus allowing Pharmacia to charge exponentially more for Celebrex than was charged for aspirin or ibuprofen and to reap considerable profits from Celebrex sales. (Id. at ¶ 3). The absence of side effects associated with Celebrex, Plaintiffs argue, had never been clinically proven. (Id.). Regardless of whether Pharmacia made such a claim, however, the Food and Drug Administration (hereinafter "FDA") required that Celebrex display on its packaging a warning of possible risks of gastrointestinal problems--the same warning required of ibuprofen-- throughout the Class Period. (Id. at ¶¶ 3, 13).

Between September 1998 and March 2000, Defendants commissioned the "Celecoxib Long-Term Arthritis Safety Study" (hereinafter "the CLASS study" or "CLASS"), a clinical study to compare the gastrointestinal problems of patients who used Celebrex to those of patients who used the NSAIDs ibuprofen and diclofenac. (Letter Brief In Support of Plaintiffs' Motion For Leave to Take Additional Depositions at 3)(hereinafter "Plaintiffs' Brief"). The instant case stems directly from the CLASS study, as Plaintiffs allege that Pharmacia made materially false and misleading statements regarding the results of this study, and that these statements led to the artificial inflation of Pharmacia's stock price. (Id. at 3).

Specifically, Plaintiffs claim that data analyzed according to the protocol established before the study began showed that Celebrex offered no benefits over the other NSAIDs in terms of prevention of gastrointestinal side effects. (Complaint at ¶ 5). To disguise these unfavorable and unexpected results, Plaintiffs argue, Pharmacia reported the results of only a limited portion of the study, changed the criteria by which Celebrex was compared to the other drugs, and changed the method of comparison. (Id. at ¶ 6). Based on this manipulated data, Plaintiffs conclude, Pharmacia declared that the CLASS study found Celebrex to be superior to other NSAIDs. (Id.).

Defendants counter that all statements made in reference to the CLASS study by Defendants were accurate, and that all relevant information pertaining to the study was both disclosed by the Defendants and well known in the marketplace. (Brief In Further Support of Defendants' Motion to Dismiss at 2-3)(hereinafter "Defendants' Reply Brief"). Specifically, Defendants claim that Pharmacia disclosed that the results of the study were based on a limited window of the study rather than the entire period, that the interpretation of the data was based on a modified protocol, and that the Celebrex results were not superior to the results of the other individual NSAIDs. (Id. at 3). Moreover, both sides concede, Pharmacia did subsequently submit the entire set of CLASS data to the FDA. (Plaintiffs' Brief at 4). As such, and because Defendants did not endorse or sufficiently entangle themselves in any resulting financial analyst reports, Defendants argue, any reports that led to an increase in the value of Pharmacia stock are not attributable to Defendants. (Defendants' Reply Brief at 20).

Following the CLASS study and the publication of an article in The Journal of the American Medical Association casting the study's results in a manner favorable to Celebrex, several articles criticized Pharmacia's reporting of the CLASS results. (Plaintiffs' Brief at 3-5). While Plaintiffs and Defendants disagree as to whether these latter articles were representative of the medical and scientific communities' opinions of Pharmacia's conduct, Pharmacia's stock price decreased significantly following the criticism. (Complaint at ¶¶ 38, 71). Following this sharp decrease, Plaintiffs brought suit, alleging that all purchasers of Pharmacia securities during the Class Period suffered monetary injury through their respective purchases of the securities at artificially inflated prices. (Id. at ¶¶ 1, 71).

As all parties are familiar with the extensive procedural history of this case, the Court need not give a detailed summary of that history for the purpose of this Opinion. Plaintiffs moved for leave to take 80 fact depositions and filed a letter brief in support of that motion on July 7, 2006. Defendants submitted a letter in opposition to Plaintiff's motion on July 18, 2006, to which Plaintiffs replied on July 31, 2006.

III. DISCUSSION

A. Legal Standard

The Federal Rules of Civil Procedure state that "[a] party must obtain leave of court, which shall be granted to the extent consistent with the principles stated in Rule 26(b)(2), if...a proposed deposition would result in more than ten depositions ...


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