Nothing To Sneeze At ...

(AP)  A federal judge has authorized a class-action lawsuit that accuses a Pennsylvania biotechnology company of misleading investors into believing its experimental common-cold drug would be approved by the Food and Drug Administration.

Shares of ViroPharma Inc. plummeted last year after the FDA rejected the drug over concerns about its safety. Investors then sued the company, alleging securities fraud.

In their lawsuit, investors take issue with a series of statements made by ViroPharma officials in the years leading up to the FDA ruling, including that clinical trials had been successful, that smokers merely got a reduced benefit from the drug when in fact their colds lasted longer and that the potential market for the drug included all adults.

Senior U.S. District Judge Clarence Newcomer rejected ViroPharma's motion to dismiss the lawsuit, ruling that investors "sufficiently alleged that the defendants either knew that their statements were false or acted with reckless disregard for the truth."

Plaintiffs' attorney Marc Topaz declined comment on the ruling, which clears the way for a trial.

Tom Doyle, ViroPharma's general counsel, pointed out that the judge tossed some of the plaintiffs' claims, which Doyle called "frivolous."

"We intend to vigorously challenge the remaining allegations. They are also without merit," he said.

The drug, Picovir, caused a stir in 2001 when scientists reported that 2,000 adult cold sufferers who took it recovered a day faster than people who took dummy pills. Picovir was designed to work by attacking the cold virus itself; existing over-the-counter medications merely ease cold symptoms.

The FDA rejected Picovir in May 2002 because the drug appeared to reduce the effectiveness of birth control pills. Also, the FDA worried that by attacking the virus that causes the common cold, the pill could cause dangerous mutations and lead to more serious infections like meningitis.

ViroPharma, based in the Philadelphia suburb of Exton, announced in August that it was stopping development of Picovir.

ViroPharma's lawyers argued that the company had no duty to predict the FDA's decision, nor to disclose drug interaction data from its birth-control study. The lawyers also argued that the statements by company officials were immaterial and did not violate securities law.

But Newcomer said that ViroPharma officials "are liable ... if they made statements that a reasonable investor would consider in deciding whether to buy stock."

In trading on the Nasdaq Stock Market, ViroPharma shares fell 5 cents to close Wednesday at $1.68