In re Theragenics Corp. Securities Litigation
| Decision Date | 20 July 2000 |
| Docket Number | No. Civ.A. 1:99CV141TWT.,Civ.A. 1:99CV141TWT. |
| Parties | In re THERAGENICS CORP. SECURITIES LITIGATION. |
| Court | U.S. District Court — Northern District of Georgia |
Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Steven G. Schulman, Salvatore J. Graziano, Samuel H. Rudman, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, for MCV Sales Inc. Profit Sharing Plan & Trust, Peter Corey, Herbert Garbutt, Robert Hudson, James J. Holten, W.H. Thread, Jr., plaintiffs.
Leonard Barrack, Barrack Rodos & Bacine, Philadelphia, PA, Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk San Diego, CA, for Daniel Kursman, plaintiff.
Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, Zachary Alan Starr, Starr & Holman, New York City, for Robert L. Thomas, Jr., plaintiff.
Fred Taylor Isquith, Shane T. Rowley, Wolf Haldenstein Adler Freeman & Herz, New York City, Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, for Sidney Fielden, plaintiff.
Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, Robert I. Harwood, Jeffrey M. Haber, Frederick W. Gerkens, Wechsler Harwood Halebian & Feffer, New York City, for Bruce B. Bernstein, plaintiff.
Marc H. Edelson, Hoffman & Edelson, Doylestown, PA, Joshua N. Rubin, Abbey Gardy & Squitieri, New York City, Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, Paul J. Scarlato, Robert S. Kitchenoff, Weinstein Kitchenoff Scarlato & Goldman, Philadelphia, PA, Bruce G. Murphy, Law Offices of Bruce G. Murphy, Vero Beach, FL, for Geraldine Byers, Howard B. Marks, Alexander T. Kowalski, plaintiffs.
Marc H. Edelson, Hoffman & Edelson, Doylestown, PA, Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, Paul J. Scarlato, Robert S. Kitchenoff, Weinstein Kitchenoff Scarlato & Goldman, Philadelphia, PA, Dennis J. Johnson, Jacob B. Perkinson, Law Offices of Dennis J. Johnson, South Burlington, VT, for Jerry Jensen, Sara Cheeseman, plaintiffs.
Marc H. Edelson, Hoffman & Edelson, Doylestown, PA, Martin D. Chitwood, John O'Shea Sullivan, Chitwood & Harley, Atlanta, GA, Salvatore J. Graziano, Keith M. Fleischman, Milberg Weiss Bershad Hynes & Lerach, New York City, Jeffrey R. Krinsk, Finkelstein & Krinsk, San Diego, CA, Jacqueline Sailer, Brian P. Murray, Rabin & Peckel, New York City, Paul J. Scarlato, Robert S. Kitchenoff, Weinstein Kitchenoff Scarlato & Goldman, Philadelphia, PA, for Joseph S. Butler, plaintiff.
Michael R. Smith, Martin Robert Thornton, Letitia M. Brown, Dan Shamus McDevitt, King & Spalding, Atlanta, GA, for defendants.
This is a private securities fraud class action brought by shareholders of Theragenics Corporation against the corporation and two of its officers. It is before the Court on Defendants' Motion to Dismiss [Doc. 15]. For the reasons set forth below, the Court grants Defendants' Motion to Dismiss.
Plaintiffs are members of a potential class of purchasers of Theragenics Corporation common stock during the period January 29, 1998, to January 11, 1999. Defendant Theragenics Corporation is a Delaware corporation with its headquarters in Norcross, Georgia. It is engaged in the business of producing and selling radioactive seed implants to treat prostate cancer. Defendant Christine Jacobs is President, Chief Executive Officer and Chairperson of Theragenics. Defendant Bruce Smith serves as Chief Financial Officer, Treasurer and Secretary of the company. Both individuals held their respective positions at all times material to the claims Plaintiff's set forth in their Amended Complaint.
Theragenics manufactures Palladium-103, also known as TheraSeed®. A competitor, Amersham Healthcare, is the primary supplier of Iodine-125, a similar product used to treat prostate cancer. For both products, medical professionals implant into the prostate between 40 and 100 rice-size radioactive seeds that emit radiation to destroy prostate cancer tumors. Iodine-125 seed implants began to be used to treat prostate cancer in the 1970's, but this treatment of prostate cancer was largely abandoned because of unsatisfactory results. By the late 1980's, however, new technology led to a resurgence in Iodine-125 seed treatment for prostate cancer. Thereafter, Theragenics entered the field with its own Palladium-103 TheraSeed®, which it previously had developed to treat other types of tumors. Theragenics's success in the field of prostate cancer treatment was tempered by the fact that TheraSeed®'s short half-life makes it less desirable than Iodine-125 for treating slow-growing prostate cancer. For this reason, according to the Amended Complaint, Iodine-125 has remained the preferred radioactive seed to treat prostate cancer.
In an attempt to bolster its earnings, on May 31, 1997, Theragenics granted Indigo Medical, Inc., a subsidiary of Johnson & Johnson Development Corporation, the exclusive worldwide right to market and sell TheraSeed®. This agreement with Indigo purportedly enabled Theragenics to focus solely on manufacturing instead of developing and maintaining its own sales force. By 1998, substantially all of Theragenics' sales occurred through Indigo. In early 1998, competitor Amersham began to encounter severe manufacturing shortages of Iodine-125. The waiting period for doctors who requested Iodine-125 increased from one month near the end of 1997 to more than four months by January 1998. This backlog became so great that in May 1998 Amersham notified its customers that it could not accept any new orders for Iodine-125 until further notice. As a result of this Iodine-125 shortage, doctors substituted TheraSeed® in their implant procedures, and Theragenics revenues consequently increased. Theragenics became concerned that this increased demand — when coupled with Indigo's aggressive marketing efforts — could result in shortages of TheraSeed®, thus placing the company in the same position as Amersham. For that reason, Theragenics asked Indigo to reduce temporarily its TheraSeed® marketing efforts.
During the period that TheraSeed® enjoyed strong sales, allegedly because of Amersham's Iodine-125 shortage, Theragenics, in its public statements, said that doctors and patients increasingly considered TheraSeed® the prostate cancer treatment of choice, and that Indigo's marketing efforts were contributing to the acceleration in sales. Theragenics did not include cautionary statements that the increased sales were affected by Amersham's Iodine-125 shortage, nor did it notify investors that it had asked Indigo to curb its sales efforts.
By August, 1998, Amersham had remedied the Iodine-125 shortage, and doctors thereafter returned to Iodine-125 as their primary radioactive seed for treating prostate cancer. As a result, Theragenics's fourth quarter 1998 earnings were below its earnings in previous quarters. In announcing its disappointing fourth quarter results, Theragenics did not disclose to investors that its decreased earnings resulted in any way from the renewed availability of Amersham's preferred Iodine-125 seeds or that it had directed Indigo to curb sales efforts. Instead, Theragenics blamed the earnings decrease on Indigo's inexperience in marketing the product. Theragenics's share price dropped 33.8% in one day, from $15.3125 to $10.125.
Plaintiffs have filed this suit alleging that Defendants knew or recklessly disregarded knowledge that the increase in Theragenics revenues in the first three quarters of 1998 resulted directly from Iodine-125 shortages, and that revenues would decline once Iodine-125 became readily available again. Furthermore, Plaintiffs allege that Defendants falsely attributed the early 1998 increase in revenues to both increased acceptance of TheraSeed® and Indigo's marketing efforts, which Theragenics actually had curtailed. According to Plaintiffs, these allegedly false statements and omissions inflated the value of Theragenics stock in violation of the Securities Exchange Act of 1934 and injured Plaintiffs as purchasers of Theragenics stock at the artificially inflated prices. Defendants have moved to dismiss the case in its entirety for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). Defendants contend that the Amended Complaint fails to comply with the heightened pleading standards of Fed.R.Civ.P. 9(b) and the Private Securities Litigation Reform Act of 1995, Pub.L. No. 104-67, 109 Stat. 743 (1995) (codified at 15 U.S.C. § 78u-4(b)).
In general, a complaint should be dismissed under Rule 12(b)(6) only where it appears beyond doubt that no set of facts could support the plaintiff's claims for relief. Fed.R.Civ.P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Linder v. Portocarrero, 963 F.2d 332, 334 (11th Cir.1992). In ruling on a motion to dismiss, ...
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