Executives in Dublin-based Icon plc, which runs clinical trials worldwide, had “motive and opportunity to defraud investors” when they sold almost $78 million (€74.3 million) worth of shares over 15 months at an “artificially inflated price”, before the stock slumped on the release of financial results in October, a US court filing alleges.
Icon has said it will “vigorously” defend itself against the US lawsuit, filed by shareholder Chang Kwok Shing, alleging it made “materially false and misleading” statements on its performance before reporting weaker-than-expected revenues last October.
The statement of claims from the case said the company insiders included group chief executive Stephen Cutler, who sold about $17 million of shares at as high a price as $335 apiece during the period, and former chief financial officer Brendan Brennan, who disposed of nearly $22 million of stock at as much as $325 a share.
Both men are listed as defendants in the case, which was filed on February 10th as a class action with the US district court for the eastern district of New York. Court documents do not name any other plaintiffs. Lawyers are currently advertising for others to join the action.
Shares in the company were changing hands at about $198 on Wednesday afternoon on the Nasdaq market in New York.
“The company intends to defend the litigation vigorously,” Icon said in a note in its recently-published annual report.
Company representatives did not respond to requests for comment.
Icon, founded in Dublin in 1990, has grown to become one of the world’s leading clinical research groups, providing outsourced clinical development and commercialisation services to the pharmaceutical companies.
The group, which employs more than 42,000 people across 55 countries, including more than 1,000 in Ireland, saw its shares slump more than 20 per cent over two days in late October, after it reported third-quarter revenues of $2.03 billion, which came in $100 million short of market estimates, according to the claim document.
The plaintiff alleges that Icon executives had presented the company’s performance and prospects in a favourable light in the 15 months leading up the results, even as the wider sector was being affected as drugmakers dramatically cut their research and development (R&D) budgets amid high interest rates.
He highlighted that Pfizer, Icon’s largest client, announced in late 2023 that it was cutting $4 billion of annual costs, with 70 per cent of this coming from a reduction in R&D expenditure.
Icon’s smaller biotechnology customers were also affected by the “unfavourable funding environment”, which limited their ability to hire clinical research organisations (CROs) to run drug trials.
“During the [15-month period], investors did not know these dynamics were specifically impacting Icon’s business and prospects,” the complaint document claimed.
“Icon and its executives claimed that, notwithstanding wider industry trends, the company was enjoying robust client demand and, in fact, benefiting from market shifts as it meant that Icon’s clients were consolidating their CRO providers, with a bigger market share going to Icon.”
The plaintiff claims that big clients actually moved business away from Icon during the period to competitors, but that investors were unaware of how its business “had significantly deteriorated”.
The document noted that analysts from investment bank Truist Securities published a report on October 25th, 2024, two days after the weak quarterly results were published, following a discussion with Icon’s management.
Truist Securities disclosed that Icon “knew that it had some studies finishing off over the course of the summer in its long-term contract base”, the document said.
The analysts also said that Icon “had known for a while that its two largest customers were diversifying CRO providers away from the company, as management described the dynamic as ‘not a new development’ and conceded that the influx of competitors ‘did not come as a surprise to Icon’,” it added.
