Supreme Court Issues Opinion in Important Securities Fraud Case Concerning Pharmaceutical Manufacturers’ Obligations to Disclose Adverse Incident Reports


On March 22, 2011, the U.S. Supreme Court issued its opinion in Matrixx Initiatives, Inc. v. Siracusano, 562 U.S. ___ (2011), an important securities fraud class action with potential implications for pharmaceutical and device manufacturers and others.

Matrixx Initiatives, Inc. v. Siracusano

The plaintiffs in Matrixx alleged that the drug manufacturer Matrixx Initiatives and three of its corporate officers (collectively “Matrixx”) violated § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. Matrixx, through a subsidiary, manufactured and sold Zicam, an over-the-counter nasal spray and gel used to treat the common cold. Zicam accounted for approximately 70% of Matrixx’ revenues. Between 1999 and 2003, Matrixx received several reports from medical researchers indicating that patients using Zicam had developed anosmia, the loss of the sense of smell. Between late 2003 and early 2004, Matrixx made several public statements regarding potential earnings growth and the safety of Zicam. Following a Good Morning America report revealing product liability suits against Matrixx as well as a doctor’s discovery or more than a dozen patients who developed anosmia after using Zicam, Matrixx’ share price fell sharply and investors filed suit.

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