Philip Morris is facing securities class actions on both sides of the Hudson over problems in its efforts to develop a less-harmful alternative to cigarettes.
In Newark before U.S. District Judge Esther Salas, Philip Morris is accused of misleading stockholders about the status of its development of so-called reduced-risk tobacco products. In the Southern District of New York, three lawsuits claim Philip Morris gave investors an overly rosy assessment of its introduction of a reduced-risk smoking product called iQOS.
Efforts are underway to bring the New Jersey and Southern District of New York lawsuits into a single forum.
Some of the shareholder suits cite a December 2017 report from Reuters describing problems in clinical research that underpins Philip Morris’ efforts to obtain approval from the Food and Drug Administration for iQOS. Others focus on the sale in February 2018 of 49,000 shares of company stock by its chief executive officer, Andre Calantzoupoulos, at $103.66 per share, and an April 2018 announcement that its sales of iQOS in various overseas markets were struggling. That announcement prompted a one-day, 15 percent decline of the company’s share price.
In Newark, plaintiff Union Asset Management Holding AG, an institutional investor, won the role of lead plaintiff on Feb. 13. Salas also appointed the firm representing Union Asset Management, Pomerantz of New York, as lead counsel and made Lite DePalma Greenberg of Newark liaison counsel.
On Monday, Pomerantz attorney Jonathan Lindenfeld asked Salas to adjourn the deadlines for filing a consolidated amended complaint, the defendants’ response, and briefing for any motion to dismiss.
Union Asset Management told Salas it considers the New Jersey case and the three New York cases to be related, and believes that the claims against Philip Morris should be prosecuted on a unified basis in one forum. The three New York cases were consolidated in November by Judge Ronnie Abrams, and motions for lead plaintiff appointment in that consolidated case are now pending. If chosen as lead plaintiff in that case, Union Asset Management will take the necessary steps to bring the cases together in one forum, Lindenfeld said in the letter.
Counsel for Philip Morris has consented to Union Asset Management’s request to put the New Jersey case on hold, Lindenfeld said. In addition to Union Asset Management, two other plaintiffs—Teamsters Local 710 Pension Fund and Greater Pennsylvania Carpenters Pension Fund—have moved for appointment as lead plaintiff. But Union Asset Management “has alleged a significantly greater loss than either of the two other movants, having incurred tens of millions of dollars in losses in connection with its purchases of Philip Morris securities,” he said.
The New Jersey plaintiffs claim the company failed to disclose to shareholders that problems arose in its research into so-called reduced-risk products. The suit cites a series of articles published by Reuters in December 2017 that described irregularities in the clinical experiments underpinning Philip Morris International’s application to the Food and Drug Administration for approval of iQOS.
Company filings with the U.S. Securities and Exchange Commission had described the highly qualified scientists around the world who were conducting studies on iQOS in preparation for an application for FDA approval. But citing the Reuters report, the lawsuit said one investigator failed to obtain informed consent from test participants, while another submitted urine samples in volumes greater than humans are capable of producing.
The iQOS product is a heating device into which a consumer inserts a specially designed tobacco product that the company would sell under brand names that include Marlboro and Parliament. The tobacco generates an aerosol when heated.
Lindenfeld of the Pomerantz firm did not return a call seeking comment. A Philip Morris spokesman, Corey Henry, declined to comment.