Class Action Suits Filed Against WebMD

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At least five law firms have filed class action lawsuits against online consumer health care content vendor WebMD Health Corp., charging the company with misrepresenting its financial position.

The lawsuits stem from WebMD's stock price falling 30 percent on July 18 after the company downgraded its financial performance for the rest of 2011.

The suits allege that beginning with the release of its financial results for the fourth quarter of 2010 on Feb. 23, 2011, the company issued a series of financial statements that did not reflect adverse material facts about sponsorship cancellations. For instance, WebMD's press release on Feb. 23 quoted CEO Wayne Gattinella as saying, "We enter 2011 strongly positioned to benefit as biopharma and consumer products companies continue to shift their marketing spend to online channels."

In subsequent months, company insiders sold $44.7 million in WebMD stock, the suits allege.

Then on July 18, WebMD announced expectations for lower revenue for the rest of the year and possibly beyond. Factors affecting the new financial forecast include extended internal and regulatory review of biopharmaceutical sponsorship programs that are causing delays in launching the programs, unexpected delays or cancellations of new sponsorships sold in previous quarters that were scheduled to launch this year, and lower licensing revenue resulting from fewer anticipated new customers. The company expects during the third quarter to launch new sponsorship services, and for advertising and sponsorship revenue growth to improve starting in mid-2012.

WebMD did not quickly respond to a request for comment. A copy of one of the lawsuits is available here.


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