Several class actions have been filed against the officers and directors of biotechnology company Organogenesis, Inc. (formerly AMEX: ORG) by stockholders who purchased the company's common stock between November 15, 1999, and January 30, 2002. The actions claim 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 names Philip Laughlin, Michael Sabolinski, Albert Erani, Donna Abelli Lopolito, John J. Arcari, Herbert M. Stein, Alan Ades, Bernard A, Marden, Alan W. Tuck, Novartis Pharma AG, and Pricewaterhousecoopers, LLP. Organogenesis was not named as a defendant because it filed for bankruptcy protection in November of 2002.

Background [heading]

Throughout the applicable period, Organogenesis had only one commercially available product -- Apligraf, a skin replacement therapy used for severe skin wounds. Apligraf is described by Organogenesis as having a structure similar to human skin and as a "skin construct." The product's human skin-like properties allow this product to be used by doctors to aid in the healing of certain types of skin ulcers and other epidermal injuries. The action alleges that the defendants were aware that the company's business model was entirely dependent upon their ability to mass-produce Apligraf and market it to physicians as an "off-the-shelf," cost-effective product that doctors could use on patients absent hospitalization.

Though Organogenesis encountered some difficulties in manufacturing and marketing Apligraf during the first half of 1999, the defendants assured investors that the company would be able to manufacture sufficient quantities of Apligraf to achieve profitability through the sales of it alone. They allegedly represented that Organogenesis maintained marketing agreements with partners such as Novartis which would allow Organogenesis to obtain the marketing support necessary to sell sufficient quantities of Apligraf, while at the same time retaining enough of the revenue split in these deals to fund operations and achieve profitability.

The action alleges that the defendants consistently reported that Organogenesis' results were consistent with the transition in progress from a research-focused company to a research-based operating company with a novel medical product in introduction phase, and that the company had necessary and available funding sources from foreseeable sales of debt and equity to both private and public investors that would allow it to achieve the defendants’ plan for sufficiency. Central to this plan was also a key agreement with Novartis which purportedly allowed the defendants to access at least $20 million through the exercise of a "put" option. This agreement purportedly allowed the defendants to raise this money at any time, and thereby maintain a large mega-million "safety net" for the company.

Failure to Disclose [heading]

The defendants allegedly failed to disclose numerous adverse factors which negatively impacted Organogenesis’ business and which would cause it to report declining financial results, materially less than the market expectations the defendants had encouraged. In particular:

1) The company could not achieve profitability through the sale of Apligraf under the terms, or even the revised terms, of the Novartis marketing agreement, which did not provide Organogenesis with enough of the revenues or profits provided through such Apligraf sales to offset the extremely high cost of production or to offset other undisclosed manufacturing problems such as defective products and recalls;

2) Undisclosed problems related to the manufacture and marketing of Apligraf were leading to even higher costs and further reducing profitability than expected. Manufacturing problems and delays were retarding production scale, and marketing issues were reducing sales. As investors would only learn following the class., Organogenesis’ own sales force was encountering resistance throughout that time concerning the cost and complexity of its products and the actual and perceived difficulties in physician reimbursement for Apligraf;

3) Organogenesis was underfunded and there was no reasonable basis to report that the company could foreseeably fund operations throughout the class., based on available sources of loans, debt and equity sales. Moreover, as the defendants were allegedly well aware but failed to disclose, it was not true that the company could force Novartis to provide the full complement of its funding as the defendants consistently represented, as certain undisclosed conditions existed. Organogenesis could not meet conditions precedent to Novartis' requirement to provide at least $10 million of its purported commitment to Organogenesis; and

4) High management turn-over at the company was having and would continue to have a disruptive effect on the operations and oversight of Organogenesis, such that it was also not foreseeable at any time during the class. that Organogenesis would be able to achieve profitability in the near-term or to attain guidance sponsored and endorsed by the defendants.

The defendants allegedly concealed the true operational and financial conditions of Organogenesis because it enabled insiders to sell over 6.2 million shares of company stock valued at over $68.8 million prior to any proper disclosure to the market.

Bankruptcy Proceedings [heading]

The scheme also allegedly allowed defendants Erani and Ades and their family members to improperly acquire the remaining assets of Organogenesis through a leveraged buyout through bankruptcy proceedings -- after their actions drove the company into bankruptcy and after they sufficiently interfered with these proceedings so as to guarantee that they acquired total domination and control over what was left of Organogenesis.

Thus, through their illegal and improper actions which ultimately forced the company into Chapter 11 proceedings, the defendants not only were able to wipe out the equity interest of all of the company's outside shareholders, but they were also able to renegotiate their agreement with Novartis -- which as the defendants allegedly knew, caused the company to lose money on every unit sale of Apligraf.

If you purchased the securities issued by Organogenesis, Inc., during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by March 22, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiff. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.