SEC v. Biopure Corporation

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In litigation brought by the Securities and Exchange Commission (SEC) against Biopure Corporation (Biopure) and several current and former officers of the company involving its drug Hemopure, counsel for Biopure retained Cornerstone Research to work with Professor Paul Gompers of Harvard Business School.

Retained by McDermott Will & Emery

In litigation brought by the Securities and Exchange Commission (SEC) against Biopure Corporation (Biopure) and several current and former officers of the company involving its drug Hemopure, counsel for Biopure retained Cornerstone Research to work with Professor Paul Gompers of Harvard Business School. The SEC alleged that Biopure misled investors by concealing negative information it had received from the FDA regarding the approval of Hemopure and that investors were damaged when Biopure’s stock price declined after market participants learned that Hemopure was unlikely to be approved.

In his report, Professor Gompers opined on the lack of materiality of the alleged corrective disclosures.

In his report, Professor Gompers opined on the lack of materiality of the alleged corrective disclosures. Using a market model, he showed that Biopure experienced large random fluctuations in its stock price during the relevant period, as was typical for small companies with risky revenue streams that were dependent on the success of a few research and development projects. He also opined that the allegedly concealed information was not material to investors because (a) there were other instances in which similar disclosures had not caused a price decline, and (b) analyst reactions showed that they did not give much weight to the disclosures. Finally, Professor Gompers opined on other potential causes of the price decline, including a cash squeeze and the announcement of an SEC investigation.

Case Expert

Paul A. Gompers

Eugene Holman Professor of Business Administration,
Harvard Business School,
Harvard University;
Senior Advisor, Cornerstone Research