A class action has been filed against specialty pharmaceutical company American Pharmaceuticals Partners, Inc. (Nasdaq: APPX) and certain of its officers and directors by stockholders who purchased the company's common stock between February 19, 2002, and September 24, 2003. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

The action alleges that the defendants made materially false and misleading statements concerning the drug Abraxane, a reformulated version of Taxol, which was under development for the treatment of breast cancer. Throughout the class period, the defendants touted Abraxane as a safer and more effective alternative to Taxol, the world's best-selling chemotherapy drug for cancer. The defendants claimed that clinical studies had indicated that:

1. Abraxane could be administered without Cremophor, a toxic substance with severe side effects that limits the tolerable dose and effectiveness of Taxol.

2. Unlike Taxol, Abraxane could be administered without the need for potentially harmful steroid pre-medication and other drugs that reduce the loss of white blood cells.

3. Because Abraxane was not formulated with a toxic substance it could be delivered in much higher doses than Taxol and was therefore more effective than Taxol with respect to reduction in tumor size.

4. Because it can be injected intravenously directly to the location of the tumor, Abraxane therapy last only one-half hour, compared to three hours for Taxol.

The truth began to emerge on September 24, 2003. On that date, American Pharmaceuticals Partners issued an ostensibly positive news release to announce the preliminary results of Phase III testing of Abraxane. However, commentators noted that the news release did not include the data underlying the trial results, and that the trial lacked a common safeguard known as double blinding designed to prevent research bias, since doctors and patients both knew whether Abraxane or Taxol was in use. Moreover, in the release the company narrowed some of its claims for Abraxane. As the market digested the release and its implications, the company's share price fell 32% from a class period high of $44.14 on September 24, 2003, to a closing price of $29.59 on September 26. Two trading days before the announcement---but after the company had seen the Phase III trial results---defendant Patrick Soon-Shiong disposed of 300,000 shares of his personally held American Pharmaceuticals Partners stock.