It's not common for a company to sue its largest shareholder.

But Esperion Therapeutics Inc. finds itself in that position after revealing late Monday its litigation against Scott Sacane and hedge funds he manages. Just four weeks ago, Esperion discovered that Sacane and his related entities had acquired about a third of its outstanding shares.

The Ann Arbor, Mich.-based company had no prior knowledge of the Sacane group's position before that point - the trader never disclosed the purchases as per SEC regulations. Esperion said he explained that the shares had been purchased inadvertently through a series of open-market transactions over several months in programmed trades that were not caught by Sacane's software.

Apparently, Sacane's software also inadvertently acquired 23 percent of the outstanding shares of Allos Therapeutics Inc., of Westminster, Colo., as well as large holdings in three medical device firms. The surprising disclosures also were made at the end of last month. One of the device firms, Lincolnshire, Ill.-based Aksys Ltd., filed suit almost immediately after learning the Sacane group had purchased nearly three-quarters of its shares, an alleged breach of an agreement reached in the spring.

And now Esperion wants to settle matters related to the ownership stake in court, as it continues its day-to-day functions as a cardiovascular drug development company.

"I think there's been very little impact from an operational standpoint," Frank Thomas, Esperion's vice president of finance and investor relations, told BioWorld Today. "Most folks at the company continue to focus on what they do best - developing drugs and bringing them to the market."

But he said a portion of Esperion's work force devotes time to uncovering facts related to the unforeseen ownership development. It filed suit in the U.S. District Court in Connecticut against Sacane, Durus Capital Management LLC, Durus Capital Management (NA) LLC and the Durus Life Sciences Master Fund Ltd., all in Norwalk, Conn. Sacane worked as a health care sector analyst at Montgomery Securities before becoming a fund manager, including a stint at Perseus.

The lawsuit seeks recovery of profits made by the Sacane group from purchases and sales of Esperion shares that represent short-swing transactions, as well as equitable relief and attorneys' fees.

"The intent of the suit is to make sure that the company recovers profits that are owed to us under Section 16(b) of the securities laws," Thomas said. "Short-swing profit rules prohibit insiders of a company, as well as shareholders that have 10 percent of the voting shares, from buying and selling stock within a six-month period. If they were to buy and sell stock in that period, any profits that they make by matching purchases and sales would be paid back to the company."

He said that the Sacane group's lawyers have acknowledged a measure of liability under the rules, adding that Sacane first bought Esperion shares early in 2001 but did not cross the 10 percent threshold until late last year. Sacane did not return calls seeking comment.

"We're going to have to go through a calculation, and I'm sure Durus is probably doing the same thing," Thomas said. "At some point, we'll need to determine what the true amounts of that liability might be. But it's not clear-cut because of a couple of things. One, there are so many transactions involved, and secondly, there are numerous entities involved."

He said any money recovered would be folded back into Esperion's operations to continue product development. The company also plans to explore options to work cooperatively with the Sacane group to settle the matter outside of court. The two parties initially reached a lock-up agreement shortly after Sacane disclosed his holdings.

The Sacane group said in early August it would not increase its holdings, nor would it sell any of its shares before Oct. 29, Esperion said. After that date, Durus would be subject to ongoing resale limits, restricting its sales during any three-month period to 1 percent of Esperion's outstanding shares or no more than the average weekly volume of the stock. The Sacane group also agreed to voting restrictions requiring that any shares it owns beyond 20 percent of Esperion's outstanding voting securities would be voted in proportion to the votes cast by all other stockholders besides the Sacane group.

Thomas said the agreement remains intact, as there has been no breach to the contract. In the meantime, the company is not counting on a definitive timeline for the court proceedings to get under way.

"A lot of that depends on how quick and cooperative they are in wanting to settle this," Thomas said, "and getting us documents, working through the calculation with us and ultimately having a court bless or take a look at the calculations."

The disclosure originally surfaced at a time that Esperion was looking to price a follow-on offering. The Sacane group said it owned about 9.7 million Esperion shares, nearly 33 percent of its 29.4 million shares reported outstanding through the quarterly period ended June 30.

Esperion sold 4 million additional shares in the offering, raising gross proceeds of $64 million as the shares priced at $16 apiece. But the sale could have garnered more funding had the stock been valued closer to $20, a price around which it hovered before the Sacane group's disclosure. (See BioWorld Today, Aug. 4, 2003.)

Following the offering, the Sacane group's stake was reduced to 29 percent as it was not part of the purchasing syndicate.

Beyond the financial wrangling of the past month, Esperion continues to push product development. Thomas said the company would release more detailed data from a Phase II study of ETC-216 in acute coronary syndrome patients in the next few months at a scientific conference or in a peer-reviewed journal. Preliminary results showed that it met its primary efficacy endpoint, demonstrating statistically significant regression of atherosclerosis.

In the first quarter of next year, Esperion also expects to release Phase II results from a study of ETC-588 in acute coronary syndromes, as well as Phase I data on ETC-642 and ETC-1001 later this year.

Thomas said the company also continues to discuss partnership opportunities for its compounds. On Tuesday, its shares (NASDAQ:ESPR) lost 90 cents to close at $16.50.