Summaries of health policy coverage from major news organizations
Law Firm Files Multimillion Dollar Securities Fraud Class-Action Lawsuit Against VaxGen
Milberg Weiss, the law firm leading legal actions against former energy giant Enron, yesterday filed a multimillion dollar securities fraud class-action lawsuit against Brisbane, Calif.-based biotech firm VaxGen, alleging that the company allowed insiders to sell stock before announcing clinical trial results for AIDSVAX, its experimental AIDS vaccine, according to a Milberg Weiss release. The suit was filed in the U.S. District Court for the Northern District of California on behalf of investors who purchased VaxGen stock between Aug. 6, 2002, and Feb. 26, 2002 (Milberg Weiss release, 3/17). Last month VaxGen announced that AIDSVAX reduced by only 3.8% the rate of new HIV infections among people who received the vaccine, compared with clinical trial participants who received a placebo injection, showing that the vaccine was ineffective at preventing new HIV infections. However, the vaccine appeared to be more effective among African Americans, Asians and other non-white, non-Hispanic volunteers, lowering the rate of new infection by almost 67% (Kaiser Daily HIV/AIDS Report, 2/24). The lawsuit alleges that VaxGen "cheated" its thousands of small investors by allowing "favored" investors to sell stock before the company announced the vaccine trial results. Specifically, Milberg Weiss alleges that several VaxGen officers knew that the trial would fail and that they allowed institutional stock sales prior to the announcement. Following the vaccine trial results announcement, VaxGen's shares fell from a 12-month high of $23.25 per share to $3 per share. A VaxGen spokesperson last week said, "If indeed this lawsuit exists, the fact that the lawyers gave it to a newspaper before VaxGen speaks volumes about its lack of merit. VaxGen has complied with all securities laws and, if need be, will defend itself vigorously," according to London's Sunday Times. "This whole thing was ridiculous," Dr. Robert Gallo, a co-discoverer of HIV, said, adding, "I don't know of a serious scientist in the world who would have expected this [vaccine] to work." Small investors said that they were encouraged by VaxGen press releases stating that all of the volunteers in early clinical trials "developed neutralizing antibodies to HIV" and that the vaccine had "protected" chimpanzees; however, the company did not state that an evaluation of HIV infections among trial participants showed that the antibodies were weak, transient and too type-specific to protect against infection, according to the Times (Deer, Sunday Times, 3/16).
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