Plaintiff’s federal securities class action complaint alleged that Savient Pharmaceuticals, Inc. and two of its officers failed to disclose that 5% of the patients in a clinical trial of Krystexxa, Savient’s new drug, suffered serious side effects. Following disclosure of that information, Savient’s share price fell by 60%. When defendants moved to dismiss, all discovery was automatically stayed. Plaintiff moved for a partial lift of that stay, seeking to compel defendants to identify corporations with which Savient has communicated about finding a licensing partner for Krystexxa as well as the global pharmaceutical company that had withdrawn an offer to acquire Savient. Plaintiff also sought permission to serve document preservation subpoenas on the entities identified by defendants.
In granting plaintiff’s motion, the court held that plaintiff’s discovery was sufficiently particularized. It sought only the identities of certain corporations and preservation, not production, of documents. The court specifically noted that production would not be permitted “[u]ntil and unless the legal sufficiency of the complaint is established.” It also rejected defendants’ argument that service of preservation subpoenas would have a “chilling” effect on the willingness of third parties to do business with Savient. According to the court, any well-informed business partner would already be aware of the allegations in this action and any threat that they might be drawn into the action would arise from their past business relationships with Savient and not from any future business dealings. (Koncelik v. Savient Pharmaceuticals, Inc., 2009 WL 2448029 (S.D.N.Y. Aug. 10, 2009))