On August 7, 2000, Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the District of New Jersey on behalf of purchasers of the securities of Biomatrix, Inc. ("Biomatrix'' or the "Company'') (NYSE: BXM) between July 20, 1999 and April 25, 2000, inclusive (the "Class Period").
The complaint alleges that the Company and certain of its officers and directors, namely Endre A. Balazs, CEO, Dir. & chief scientific officer, and Rory B. Riggs, Pres. and Dir., violated the federal securities laws by providing materially false and misleading information about the Company's business, earnings growth and financial condition during the Class Period. Specifically, Biomatrix manufactures markets and sells a viscoelastic product called Synvisc, a gel-like substance that is injected into arthritic knees to postpone the necessity of, or even provide a substitute for, knee-replacement surgery. Throughout the Class Period, defendants artificially inflated the Company's reported net revenue, net income, earnings per share, and product sales of Synvisc through the twin practices of reporting revenue upon the shipment of product to distributors and stuffing the product pipeline with excess inventory.
Defendants further misrepresented that demand for Synvisc was increasing and that there was growing acceptance within the medical community for Synvisc "as an effective therapy" for osteoarthritis. Defendants knew, however, that the medical community was increasingly doubtful that Synvisc was a viable medical treatment, as numerous studies had shown that Synvisc was no more effective than a placebo or salt water injections in treating osteoarthritis, and might actually cause significant, long-term, adverse effects, such as cartilage damage.
As Synvisc's limitations became increasingly obvious to them, the individual defendants determined to cash out their investments but wanted to do so without driving down the price of their shares in the process. To this end, defendants engineered a combined cash and stock merger of the Company into Genzyme Corporation,announcing the Company's agreement to the merger on March 6, 2000. That announcement sought to manage the disclosure that due to the buildup of inventory in the channel, first-quarter sales might not be as robust as defendants had indicated just weeks earlier. Thus during a conference call with industry analysts, defendant Riggs was careful to state that there would still be growth for the quarter, but less than defendants had expected. It was not until April 25, 2000, when Biomatrix announced first-quarter revenues for 2000, that defendants disclosed for the first time the effect that channel-stuffing throughout 1999 had had on its year 2000 revenues and earnings. The Company announced first-quarter revenues of $16.7 million and net income of $0.5 million or $0.02 per diluted share. By this time the Company's share price had dropped to $19 15/16, down 85% from a Class Period high of $37 on March 1, 2000.
If you wish to read the current Complaint, please click the Complaint link.
Additional cases have been filed on behalf of investors. Motions have been made to consolidate the various cases and appoint a Lead Plaintiff. The court has yet to rule on these motions. An amended complaint was filed on February 20, 2001. On April 23, 2001, defendants moved to dismiss this complaint. The motion was denied. A settlement of $2.45 million was approved.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Fred Taylor Isquith, Esq. at Wolf Haldenstein Adler Freeman & Herz LLP, 270 Madison Avenue, New York, New York 10016, or by telephone at (800) 575-0735.