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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 3, 1998
INTERNEURON PHARMACEUTICALS, INC.
---------------------------------
(Exact name of registrant as specified in charter)
DELAWARE
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(State of other jurisdiction of incorporation)
0-18728 043047911
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(Commission File Number) (IRS Employer
Identification No.)
One Ledgemont Center, 99 Hayden Avenue, Lexington, Massachusetts 02421
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (781) 861-8444
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Item 5. Other Events
On September 3, 1998, Interneuron Pharmaceuticals, Inc. (the "Company")
announced that it reached an agreement in principle to settle litigation and
claims against the Company by persons who used Redux(TM) (dexfenfluramine).
Reference is made to the Letter of Understanding between the Company
and the Plaintiffs' Management Committee dated September 3, 1998, and the
Company's press release dated September 3, 1998, filed as Exhibits 99.1 and
99.2, respectively, hereto and incorporated by reference herein.
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(c) Exhibits
99.1 Letter of Understanding between the Company and the Plaintiffs'
Management Committee dated September 3, 1998.
99.2 Press Release dated September 3, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNEURON PHARMACEUTICALS INC.
By: /s/ Glenn L. Cooper, M.D.
-------------------------------------
Glenn L. Cooper, M.D.
President and Chief Executive Officer
Dated: September 9, 1998
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Exhibit 99.1
LETTER OF UNDERSTANDING
Interneuron Pharmaceuticals, Inc. ("Interneuron") and the Plaintiffs'
Management Committee ("PMC") hereby agree to propose a limited fund, mandatory
class action settlement on the following terms. This Letter of Understanding is
not the final agreement of the parties, but an outline of the material
provisions of a formal Settlement Agreement which will be submitted to the
United States District Court for the Eastern District of Pennsylvania (the
"Court") for approval. The terms of this Letter of Understanding shall be merged
into and superseded by the final Settlement Agreement as approved by the Court.
Neither this Letter of Understanding nor any subsequent Settlement
Agreement entered into pursuant hereto shall be construed as evidence of or an
admission by Interneuron of any liability or wrongdoing whatsoever or by
Plaintiffs of any lack of merit in their claims.
Accordingly, Interneuron and the PMC hereby propose that the Released
Claims against Interneuron and the released parties specifically identified in
Paragraph 8 be settled on the following terms:
1. Motion for class certification: The PMC will prepare a motion with
supporting memorandum seeking certification of a mandatory, limited fund class
pursuant to Federal Rule of Civil Procedure 23(b)(1)(B). In addition to class
certification, the motion will seek approval of the proposed class action
settlement. Prior to the filing of such Motion, Interneuron will give the PMC
and their experts (including Dr. Harvey Rosen and Associates) an opportunity to
conduct a reasonable and duly diligent review of the financial condition of
Interneuron, including its insurance coverage, for the purpose of evaluating
Interneuron's financial condition, pursuant to the confidentiality agreement
currently agreed to by the PMC and Interneuron. In addition, Interneuron will
provide the PMC with an affidavit from an appropriate Interneuron representative
supporting the fact that a "limited fund" exists. The motion, memorandum of law
and other supporting documents will not be
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filed until Interneuron has had an opportunity to review and approve them. A
preliminary order approving the settlement shall be submitted to the Court.
2. Class Definition: The class shall be defined as comprehensively as
possible and shall include:
a. Redux Class Members: All persons in the United States who used
Redux prior to the date on which notice of the Class Action Settlement is
provided and any other persons in the United States asserting standing to
sue Interneuron or any released party as a result of another person's use
of Redux prior to the date on which notice of the Class Action settlement
is provided, including family members, subrogees, and assignees.
b. Conspiracy/Concert of Action Class Members: All persons in the
United States who used a diet drug other than Redux prior to the date on
which notice of the class action settlement is provided and who seek to
hold Interneuron or any released party liable on a theory of conspiracy,
concert of action or any similar legal theory and any other persons in the
United States asserting standing to sue Interneuron or any released party
based upon a conspiracy, concert of action or any similar legal theory as a
result of another person's use of a diet drug other than Redux prior to the
date on which notice of the class action settlement is provided, including
family members, subrogees, and assignees.
There shall be no right of opt-out.
3. Creation of Settlement Funds: A fund for the payment of class members
shall be created as follows:
a. The parties will jointly present to the Court this signed Letter of
Understanding setting forth the proposed terms of the class action
settlement and seek an order immediately staying all pending litigation and
preliminarily enjoining future litigation
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against Interneuron and the released parties, both state and federal,
arising out of any released claims. The stay order, however, shall not
preclude the entry of an order of dismissal, removal to federal court,
severance of Interneuron and/or Boehringer Ingelheim Pharmaceuticals, Inc.,
or transfer to the MDL. Within ten days after the Court enters such stay
order (hereafter "Stay Date"), Interneuron shall deposit $2 million into an
interest-bearing escrow account with a designated, Court-approved bank. The
account holder will be the Interneuron Class Action Settlement Fund.
b. Within ten days after the Court enters a final order approving the
settlement ("Final Approval Date"), Interneuron shall deposit $3 million
into the Interneuron Class Action Settlement Fund Account.
c. Within ten days after the settlement is final, Interneuron shall
deposit $10 million into the Interneuron Class Action Settlement Account.
In addition, Interneuron shall deposit an amount equal to interest on such
$10 million at an annual rate equal to the rate earned by the $2 million
deposited ten days after the Stay Date. The settlement is final when all
appeals have been exhausted and no further possibility of appeal exists
("Final Settlement Date").
d. Interneuron shall deposit all available and uncommitted insurance
proceeds remaining on the Stay Date into the Interneuron Class Action
Settlement Fund Account. Insurance proceeds are considered available and
uncommitted only to the extent that there are no unpaid bills for
reasonable legal expenses (including fees and disbursements) as of the Stay
Date, regardless of whether such bills have been forwarded to Interneuron's
insurance carriers, or unbilled legal expenses (including fees and
disbursements) for expenses incurred prior to the Stay Date. In the event
Interneuron is unable to cause its insurers to pay the available and
uncommitted insurance proceeds into the Interneuron Class Action Settlement
Fund Account, Interneuron shall initiate a
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declaratory judgment action against its insurers in order to compel the
contribution of all available and uncommitted insurance proceeds into
the Interneuron Class Action Settlement Fund Account. Bills for fees and
expenses incurred by Interneuron in connection with such declaratory
judgment action shall be timely submitted to and promptly paid by the
Interneuron Class Action Settlement Fund following court review and
approval of such bills, provided however, that Interneuron shall seek to
recover its fees and expenses associated with litigating the declaratory
judgment action in said action. The PMC shall have the right to review and
comment upon Interneuron's application for payment of its litigation fees
and expenses. In the event that Interneuron recovers all or any part of its
fees and expenses incurred in litigating the declaratory judgment action in
said action, Interneuron shall deposit such amounts in the Interneuron
Class Action Settlement Fund Account.
e. Additional payments to the Interneuron Class Action Settlement Fund
shall be made by Interneuron according to the terms of a Royalty Agreement
to be entered into, a summary of which is attached as Exhibit A.
f. The Interneuron Class Action Settlement Fund shall be structured
and maintained so as to constitute a "qualified settlement fund" within the
meaning of Treasury Regulation Section 1.468B-1.
4. Future Raising of Capital/Use of Funds: The parties acknowledge that
Interneuron intends to remain as an ongoing business entity, subject to its
right to seek to merge, consolidate, or acquire other business entities, and
therefore, Interneuron requires cash and assets for business and product
development, and ongoing business interests. As such, the parties acknowledge
that Interneuron shall be entitled to retain a cash balance and may raise
capital from time to time for the on-going conduct of its business, including
clinical trials and expenses related to the development and marketing of
technology and products. The receipt of funds from any source (whether it be
from the extension of credit,
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issuance of securities, sale of assets, proceeds received from litigation
(except for proceeds of the declaratory judgment action litigated as described
above), or otherwise) shall not cause Interneuron's obligations to contribute
money to the Interneuron Class Action Settlement Fund to increase beyond what is
provided for in this Letter of Understanding. Interneuron, however, acknowledges
that it will have fiduciary duties relating to the Interneuron Class Action
Settlement Fund Account, and accordingly, shall not voluntarily take any action
to avoid its performance under the terms of the Settlement Agreement, including
its obligation to make contributions of money to the Interneuron Class Action
Settlement Fund Account in accordance with this Letter of Understanding and the
Settlement Agreement.
5. Stay and Injunction: The parties will jointly seek an order continuing
the stay and preliminary injunction entered on the Stay Date, to be entered
contemporaneously with the order preliminarily approving the settlement. The
parties will jointly seek a permanent injunction, enjoining all litigation
against Interneuron and the released parties, both state and federal, arising
out of any released claims, to be entered contemporaneously with the final order
approving the settlement. The stay and injunction orders, however, shall not
preclude entry of an order of dismissal, removal to federal court, severance of
Interneuron and/or Boehringer Ingelheim Pharmaceuticals, Inc., or transfer to
the MDL.
6. Discovery against Interneuron: In order to minimize Interneuron's
litigation expenses and maximize the amount of money in the Interneuron Class
Action Settlement Fund, Interneuron and the PMC will jointly seek an order from
the Court enjoining Interneuron from participating in formal or informal
discovery proceedings in any Redux or Fen-Phen litigation without the Court's
permission.
7. Released Claims: The settlement agreement shall provide for a release of
the
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following claims:
a. Redux Claims: all claims which have or might have been asserted by
class members against Interneuron or any released parties arising out of
any class members' use of Redux;
b. Conspiracy/Concert of Action Claims: all claims based upon a theory
of conspiracy, concert of action or other similar legal theory, which have
or might have been asserted by any class member against Interneuron or any
released parties arising out of a class member's use of a diet drug other
than Redux;
The Released Claims (both 7a and 7b) shall include known or unknown claims
for past and future pain and suffering, emotional distress, medical expenses,
lost wages, medical monitoring, other compensatory damages, injunctive relief
and punitive damages. Released Claims (both 7a and 7b) shall include all
derivative, assigned and subrogated claims, including claims for loss of
consortium and claims which might be asserted by representatives, executors,
heirs, assignees and subrogees.
Class members shall, in the release, agree to reduce any judgment that they
might obtain against any defendant by an amount equal to the total amount which
they are entitled to receive pursuant to the Interneuron settlement (before
deduction of any amounts for costs and counsel fees) and shall not be required
to further reduce any judgment that they might obtain against any defendant by
the amount, percentage or share of such judgment attributable to the released
parties. The form of release shall be attached to the final agreement of the
parties as an exhibit thereto.
8. Released Parties: The released parties are:
a. Interneuron, Boehringer Ingelheim Pharmaceuticals, Inc., their
respective parents, subsidiaries, affiliates, divisions, current and former
officers, directors, employees, attorneys, agents, and insurers.
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b. Any and all predecessors and/or shareholders of Interneuron and/or
Boehringer Ingelheim Pharmaceuticals, Inc.; provided, however, that any
predecessor and/or shareholder of Interneuron and/or Boehringer
Pharmaceuticals, Inc. who is or becomes a defendant in Fen-Phen litigation
shall be considered a released party pursuant to this paragraph 8b only to
the extent that such entity is sued in its capacity as a predecessor and/or
shareholder of Interneuron and/or Boehringer Pharmaceuticals, Inc.
c. Any and all successors to Interneuron and/or Boehringer Ingelheim
Pharmaceuticals, Inc.; provided, however, that any current or future
defendant in Fen-Phen litigation who becomes a successor to Interneuron
and/or Boehringer Ingelheim Pharmaceuticals, Inc. by reason of a merger,
acquisition, consolidation or otherwise shall be considered a released
party pursuant to this paragraph 8c only to the extent that such entity is
sued in its capacity as a successor of Interneuron and/or Boehringer
Pharmaceuticals, Inc.
d. All distributors of Redux, including wholesale distributors,
private label distributors, pharmacists, retail distributors, physicians,
hospitals and clinics, and their respective predecessors, successors,
parents, subsidiaries, affiliates and divisions, and their respective
current and former shareholders, officers, directors, employees, attorneys,
agents, and insurers; but only as to released claims as to which such
persons would have a contractual, common law, or statutory right of
indemnity against Interneuron;
e. None of the released parties described in paragraphs 8b, 8c, or 8d
are released from any claims based upon their own independent negligence or
culpable conduct (including, without limitation, professional malpractice
claims against physicians and health care providers).
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9. Bar of Contribution and/or Indemnity Claims: The parties will jointly
seek an order barring and enjoining claims by other defendants in Fen-Phen
litigation seeking contribution and/or indemnity from Interneuron or the
released parties arising out of the sale of Redux. With respect to the claim of
each specific class member, defendants in the Fen-Phen litigation will be
entitled to an offset for the settlement of the released claims in an amount
equal to the gross amount to which the class member is entitled pursuant to the
Interneuron settlement (before deduction of costs and counsel fees).
10. Medicare and Medicaid: No payments shall be made from the Interneuron
Class Action Settlement Fund unless Medicare and Medicaid claims have been
resolved to the satisfaction of Interneuron.
11. Dismissal: The parties will jointly seek an order dismissing with
prejudice the class action and all pending MDL lawsuits as to Interneuron and
the released parties, to be entered contemporaneously with the order finally
approving the settlement. Federal actions subsequently transferred to the MDL
will also be subject to dismissal with prejudice as to Interneuron and the
released parties, if not previously dismissed by the transferor court. The PMC
will cooperate with Interneuron to obtain dismissals with prejudice of all
pending state court actions as to Interneuron and the released parties as soon
as practicable after the Final Settlement Date.
12. Notice of Settlement: Notice of the class action and settlement shall
be provided to potential class members in the following manner:
a. Long form notice by mail:
(i) The long form notice of the settlement shall be sent to all
potential class members with currently pending litigation against
Interneuron and all attorneys of record representing plaintiffs with
currently pending litigation against Interneuron.
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b. Short form notice by publication: The short form notice shall be
published on two days in USA Today.
The costs of notice shall be paid by the Interneuron Class Action
Settlement Fund.
13. Distribution of Settlement Proceeds: The Court will appoint a Claims
Administrator responsible for the distribution of settlement proceeds in
accordance with a protocol to be developed by and the Claims Administrator and
approved by the Court, after notice and an opportunity to be heard has been
afforded to Class Counsel, class members, private counsel for class members and
all other interested parties.
14. Attorneys' Fees, Litigation Costs and Administrative Expenses: The
amount of attorneys' fees and litigation costs to be paid to Class Counsel out
of the Interneuron Class Action Settlement Fund shall be determined by the
Court, in its sole discretion, in accordance with Fed.R.Civ.P. 23(b)(1)(B),
23(d) and 23(e). All class attorneys' fees, litigation costs and costs incurred
in the administration of the settlement funds shall be paid out of class action
settlement funds. In no event will Interneuron be required to make additional
contributions beyond those provided for in this Letter of Understanding on
account of class attorneys' fees and costs.
15. Interneuron and the Released Parties shall be indemnified by the
Interneuron Class Action Settlement Fund, by appropriate petition to the Court,
for and against all reasonable fees, costs, expenses incurred in defending,
settling, or satisfying judgments entered in any claim or proceeding involving
Released Claims by any person included within the definition of the class
(including cross-claims, third party claims, subrogation claims, claims for
contribution and/or indemnity) that are not terminated as a result of the Class
Action Settlement Agreement or that are filed or pursued in the future despite
the Class Action Settlement Agreement. Until the end of the Term (as defined in
Exhibit A hereto),
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the Interneuron Class Action Settlement Fund shall maintain a
percentage of any cash deposited pursuant to the terms of the settlement
agreement as a reserve sufficient to satisfy its obligations under this
paragraph.
16. Interneuron shall have the right to withdraw from, terminate and cancel
its obligations under the settlement agreement upon any of the following events:
a. A stay order is not entered by the Court at the time the Letter of
Understanding is submitted;
b. Preliminary approval of the settlement agreement is not entered by
the Court;
c. A mandatory, non-opt class as defined in the settlement agreement
is not certified;
d. Final approval of the settlement agreement is not entered by the
Court;
e. Class certification and/or approval of the settlement is overturned
on appeal for any reason;
f. Pending and future litigation is not stayed and preliminarily
enjoined contemporaneously with Preliminary Approval of the settlement
agreement;
g. All litigation is not permanently enjoined against Interneuron and
the released parties with Final Approval of the Settlement Agreement;
h. The class action and all pending MDL lawsuits against Interneuron
and any released party are not dismissed with prejudice as to Interneuron
and any released party with Final Approval of the settlement agreement; or
i. An order is not entered by the Court permanently barring
contribution and indemnity claims by other Fen-Phen defendants in
accordance with this Letter of Understanding.
17. The PMC shall also have the right to withdraw from the Settlement
Agreement
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if, after 60 days from the date the Court enters an order preliminarily
approving the class action settlement, Interneuron has, in the PMC's reasonable
determination, been unable to compel payment of its insurance proceeds.
18. If Interneuron withdraws from, terminates, or cancels its obligations
under the class action settlement agreement pursuant to paragraph 16 or the PMC
withdraws from the Settlement Agreement pursuant to paragraph 17, all funds
previously deposited by Interneuron and any interest accrued thereon shall be
refunded to Interneuron (less the cost of class notice, fees and expenses
associated with any declaratory judgment action to compel payment of
insurance proceeds, and other mutually agreed upon administrative expenses).
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AGREED this 3rd day of September, 1998.
INTERNEURON PHARMACEUTICALS, INC.
By:/s/ Glenn L. Cooper
---------------------------
Glenn L. Cooper, M.D.
President and Chief Executive Officer
CO-COUNSEL FOR PLAINTIFFS'
MANAGEMENT COMMITTEE
By:/s/ Arnold Levin
--------------------------
Arnold Levin
By:/s/ John Cummings
--------------------------
John Cummings
By:/s/ Stanley M. Chesley
--------------------------
Stanley M. Chesley
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EXHIBIT A
SUMMARY OF ROYALTY AGREEMENT
Interneuron Pharmaceuticals, Inc. (the "Parent Company") and the
Interneuron Class Action Settlement Fund Account (the "Fund") hereby agree to
enter into a Royalty Agreement (the "Royalty Agreement") as part of a formal
Settlement Agreement which will be submitted to the United States District Court
for the Eastern District of Pennsylvania (the "Court") for approval. This
Exhibit A is not the final agreement of the parties with respect to the
entitlement of the Fund to receive royalty payments from the Parent Company, but
a summary of the material provisions and terms of a Royalty Agreement that will
be entered into by the parties as referenced in the Letter of Understanding. The
material provisions of the Royalty Agreement are stated below:
1. The Parent Company and the Fund agree that for a period commencing on
the Final Settlement Date and ending seven (7) years from the Final
Settlement Date (the "Term"), the Fund shall receive additional cash
payments (the "Royalty Participation") from the Parent Company
consisting of royalties equal to (a) seven percent (7%) of gross sales
of products of the Parent Company for products which are marketed
directly by the Parent Company; (b) 15% of revenues related to product
sales received by Parent Company from sublicensees of Parent Company
for products which are sublicensed by the Parent Company, including
license fees, royalties and milestone payments but excluding
reimbursements for research and development expenses and equity
investments by sublicensees and (c) 15% of cash dividends related to
product sales received by Parent Company from subsidiaries of Parent
Company (the gross sales, revenues and dividends referred to in (a),
(b) and (c) are referred to collectively herein as "IPI Receipts"). The
amount of royalties to be paid by the Parent Company to the Fund during
the Term shall be in the amount
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of $55 million (the "Royalty Amount"). The entitlement of the Fund to
receive the Royalty Amount shall be evidenced by an instrument (the
"Instrument") with a face value of $55 million, the unpaid balance of
which shall mature at the end of the Term. If, at the end of the Term,
the outstanding balance of the Royalty Amount has not been reduced to
zero as a result of the royalties paid by the Parent Company to the
Fund, then the Fund shall receive from the Parent Company shares (the
"Royalty Shares") of the Parent Company's common stock, $.001 par
value ("Common Stock"), the receipt of which shall retire the
aforesaid Instrument that had been delivered to the Fund to evidence
the Fund's entitlement to receive the Royalty Amount. In such event,
the number of Royalty Shares that shall be delivered to the Fund at
the end of the Term shall be calculated by (a) subtracting from the
Royalty Amount the actual amount of royalties paid to the Fund to
determine the outstanding balance of the Royalty Amount still owed to
the Fund at the end of the Term ("the Royalty Balance) and (b)
dividing the Royalty Balance by a price (the "Share Price") equal to
200% of the market price of the Common Stock (to be determined based
on the average Closing Price per share of the Common Stock on the 33
trading days beginning on July 10, 1998 and ending on August 25,
1998). The Share Price will be subject to standard anti-dilution
adjustments, including for stock splits, stock distributions or
dividends, or recapitalizations payable in Parent Company stock, or
the merger of the Parent Company with another corporation in which the
Parent Company is not the surviving corporation. In the event of a
merger of the Parent Company into another corporation in which the
Parent Company is not the surviving corporation, the Royalty Balance
immediately prior to the effective date of the merger shall
automatically convert upon the merger into the number of shares of
stock or other securities or property of the surviving or resulting
corporation to which
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a holder of the number of shares of Common Stock issuable upon
conversion of such Royalty Balance at the then applicable Share
Price would have been entitled.
2. Royalties paid pursuant to paragraph 1 shall be deposited into the
Fund on June 30 and December 31 of each year during the Term (the
"Royalty Payment Dates"), and shall be calculated based upon IPI
Receipts received by the Parent Company during the preceding six month
periods ending March 31 and September 30, respectively (the "Royalty
Calculation Periods"); provided, however, that the first royalty
payment shall be deposited into the Fund on the Royalty Payment Date
which occurs after the first Royalty Calculation Period ending after
the Final Settlement Date.
3. If, at the end of the Term, the Fund has not received $55 million in
Royalty Payments from the Parent Company, such that a Royalty Balance
exists requiring the Parent Company to issue Royalty Shares to the
Fund, the Parent Company shall have the right in lieu of delivering
all or any portion of the Royalty Shares, to pay to the Fund at the
end of the Term, cash in the amount that is equal to 90% of the fair
market value of the Common Stock elected to be paid in cash, upon 90
days notice to the Fund. Further, the Parent Company shall have a
right of first refusal to purchase Royalty Shares, at any time, in the
event of a proposed sale of Royalty Shares by the Fund to a third
party, on the same terms as the proposed sale.
4. Until publicly sold, the Fund agrees to vote Royalty Shares in the
same proportion as other Parent Company stockholders on all matters
submitted to stockholder vote. Public resales of Royalty Shares shall
be in accordance with volume restrictions of Rule 144 under the
Securities Act of 1933.
A2
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Exhibit 99.2
FOR IMMEDIATE RELEASE
CONTACT AT (781) 402-3410
GLENN L. COOPER, M.D. WILLIAM B. BONI
PRESIDENT AND CHIEF EXECUTIVE OFFICER VP, CORP. COMMUNICATIONS
INTERNEURON SIGNS AGREEMENT IN PRINCIPLE
TO SETTLE REDUX LITIGATION
LEXINGTON, MA, September 3, 1998 - Interneuron Pharmaceuticals, Inc. (NASDAQ:
IPIC) today announced that it has reached an agreement in principle to settle
litigation and claims against the Company by persons who used Redux(TM)
(dexfenfluramine), a prescription anti-obesity drug withdrawn from the market in
September 1997 by Interneuron and Wyeth-Ayerst Laboratories, a division of
American Home Products Corporation.
The terms of the proposed settlement were described in a letter of understanding
submitted to the U.S. District Court for the Eastern District of Pennsylvania.
The proposed settlement is contingent upon the certification of a limited fund
class action, based on the need to preserve the limited assets of Interneuron.
All persons in the United States who used Redux, and certain other persons such
as their family members, would be included in the class and bound by the terms
of the settlement. Membership in the class is mandatory for all persons included
within the class definition. Under the terms of the proposed settlement, class
members asserting claims against Interneuron or Boehringer Ingelheim
Pharmaceuticals, Inc. (which encapsulated and packaged Redux) will be required
to seek compensation only from the settlement fund, and their lawsuits against
Interneuron and Boehringer will be dismissed. By agreeing to the proposed
settlement, Interneuron does not, however, admit liability to any plaintiffs or
claimants.
The proposed settlement agreement requires Interneuron to deposit a total of $15
million in three installments into a settlement fund. The first installment of
$2 million will be deposited into the settlement fund within ten days of today.
A second installment of $3 million is to be made within ten days after the
settlement agreement is approved by the Court. A third installment of $10
million, plus interest, is to be made within ten days after the settlement
becomes final.
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In addition, the proposed settlement provides for Interneuron to deposit all
remaining and available insurance proceeds into the settlement fund. Interneuron
has also agreed to make certain royalty payments to the settlement fund, in the
total amount of $55 million, based upon sales of Interneuron products and other
revenues, over a seven year period after the settlement becomes final. If, at
the end of that seven year period, the amount of royalty payments made by
Interneuron is less than $55 million, the settlement fund will receive shares of
Interneuron stock in an amount equal to the unpaid balance divided by
approximately $7.50 per share. At or prior to the time the settlement becomes
final, the Company will incur charges to operations equal to the estimated fair
value of the consideration given, exclusive of insurance proceeds. The proposed
settlement is subject to execution of a formal settlement agreement, which will
not become final until approved by the Court and the time for filing appeals has
passed or all appeals have been exhausted.
"The timely resolution of legal proceedings related to Redux serves the best
interests of the company and its shareholders," said Glenn L. Cooper, M.D.,
president and chief executive officer of Interneuron. "This settlement will
allow us to focus the financial and human resources of the company upon the
development of the other products in our portfolio rather than upon protracted
legal activities."
Interneuron Pharmaceuticals is a diversified biopharmaceutical company engaged
in the development and commercialization of a portfolio of products and product
candidates primarily for neurological and behavioral disorders. Interneuron is
also developing products and technologies, generally outside the central nervous
system field, through three subsidiaries: Intercardia, Inc. focused on
cardiovascular disease and carbohydrate-based drug discovery, InterNutria, Inc.
focused on dietary supplement products, and Progenitor, Inc. focused on
developmental genomics.
Except for the descriptions of historical facts contained herein, this press
release contains forward-looking statements that involve risks and uncertainties
as detailed from time to time in the Company's filings under the Securities Act
of 1933 and the Securities Exchange Act of 1934, including in particular, risks
relating to the withdrawal of Redux and Redux-related litigation, including risk
relating to the finalization of the proposed related settlement, uncertainties
relating to regulatory approvals and clinical trials; product liability; the
need for additional funds; the early stage of products under development; risks
relating to product launches and managing growth; government regulation, patent
risks, dependence on third parties and competition.
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