Beatie and Osborn LLP Files Securities Fraud Action Against Schein Pharmaceutical

Strategic Insights -

A class action has been filed in the United States District Court for the District of New Jersey against Schein Pharmaceutical, Inc., alleging that the company made material misstatements and omissions in its Registration Statement and Prospectus regarding its failure to comply with current Good Manufacturing Practices (cGMP) at its Phoenix-based Steris facility. The complaint charges Schein and others with violating Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. As a result of the company's failure to disclose the extent of its non-compliance, investors suffered significant losses when the price of Schein common stock plummeted 53% after the FDA seized all products made by the Steris plant on September 10, 1998.

Key Takeaways:

  • The class action charges Schein and others with violating Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 due to material misstatements and omissions in the Registration Statement and Prospectus regarding cGMP non-compliance at the Phoenix-based Steris facility.
  • Schein disclosed a warning letter from the FDA and included a boilerplate statement of "risk factors" but falsely represented that the company maintained "strict quality control procedures" and was in material compliance with the FDA's cGMP Standards.
  • The Company's failure to disclose the extent of its non-compliance resulted in investors suffering significant losses when the price of Schein common stock plummeted 53% after the FDA seized all products made by the Steris plant on September 10, 1998.
  • The Steris facility accounted for about 40% of Schein's revenues and 50% of gross profits.
  • The Company's initial public offering (IPO) occurred on April 9, 1998.
  • A copy of the complaint listing the allegations may be obtained by contacting the law firm of Beatie and Osborn LLP.
  • To serve as a representative plaintiff, a class member must meet certain legal standards and move the court no later than November 13, 1998.
  • For more information or to be included in a list of class members, contact Kevin M. McGee, Esq., toll-free at 800-891-6305 or 212-888-9000.

Statistics:

  • 53%: Decline in the price of Schein common stock after the FDA seized all products made by the Steris plant on September 10, 1998.
  • 40%: Percentage of Schein's revenues accounted for by the Steris facility.
  • 50%: Percentage of gross profits accounted for by the Steris facility.
  • April 9, 1998: Date of Schein's initial public offering (IPO).
  • September 10, 1998: Date the FDA seized all products made by the Steris plant.

Sources:

  • Beatie and Osborn LLP's press release dated September 28, 1998.
  • The United States District Court for the District of New Jersey's docket for the class action case.