Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 1610 11 important cases to watch in 2017 goodwin investors in press releases dated April 15 and April 18, 2016. Upon this news, Chiasma’s stock price dropped by more than 63%. On June 9, 2016, investors filed a federal securities class action against Chiasma and two of its executives asserting claims under Section 10(b) and Rule 10b-5 of the 1934 Act, as well as Section 11 of the 1933 Act. On February 10, 2017, plaintiffs amended their complaint and added 12 new defendants, including members of Chiasma’s board of directors and various underwriters involved in the IPO. The amended complaint drops the 1934 Act claims and instead alleges that Chiasma, the individual defendants, and the underwriter defen- dants made false or misleading statements in violation of Sections 11 and 15 of the 1933 Act. Specifically, the complaint alleges that the registration statement issued in connection with Chiasma’s IPO contained false or misleading statements regarding (1) Chiasma’s pur- ported ability to get Mycapssa approved using shorter development timelines and less capital; (2) the catego- rization of Mycapssa’s Phase 3 clinical trial data; and (3) the reasons Roche decided to terminate its licensing agreement with Chiasma. Garbowski et al v. Tokai Pharmaceuticals, Inc. et al, No. 1:16-CV-11963 (D. Mass.) (Judge Mark L. Wolf) Tokai Pharmaceuticals is a clinical-stage biopharma- ceutical company focused on developing therapies for prostate cancer and other hormonally driven diseases, including its lead drug candidate, galeterone, an oral treatment for patients with metastic castration-resistant prostate cancer (“mCRPC”). On July 26, 2016, Tokai disclosed that it had discontinued its Phase 3 clinical trial of galeterone on the recommendation of the trial’s independent data monitoring committee. Following the announcement, the company’s stock price dropped by more than 78%. Subsequently, the company announced that it would not proceed with its planned study of galeterone in mCRPC patients and that the board of directors was considering strategic alternatives for the company, including a possible dissolution. On Septem- ber 29, 2016, investors filed a federal securities class action, alleging that Tokai made false and misleading statements regarding galeterone’s prospects for FDA approval, in violation of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act and Sections 11, 12(a)(2), and 15 of the 1933 Act. The complaint alleges that Tokai’s IPO registration statement, press releases and period- ic reports were misleading because they expressed optimism about the clinical development of galeterone and its advantages over competing therapies while failing to disclose deficiencies in the drug’s clinical trials that made it “virtually certain” the drug would not be approved by the FDA. There have been two other puta- tive class actions based on substantially similar allega- tions filed against Tokai in federal and state court (Doshi v. Tokai Pharmaceuticals, Inc. et al, Case No. 1:16-cv- 11992 (D. Mass.) and Wu v. Tokai Pharmaceuticals, Inc. et al, Case No. 1684-3725-BLS2 (Suffolk County, MA)). A motion to consolidate the cases is currently pending. In re Aveo Pharmaceuticals Inc. Securities Litigation, Case No. 1:13-cv-11157-DJC (D. Mass.) (Judge Denise J. Casper) AVEO Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to the discovery, development and commercialization of cancer therapies. At the time of its IPO in March 2010, AVEO’s lead drug can- didate was tivozanib, an oral inhibitor of the vascular endothelial growth factor receptors that the company hoped to commercialize as a targeted treatment for the most prevalent form of kidney cancer. In 2010, AVEO completed a Phase 3 clinical trial designed to assess tivozanib as a first-line treatment for renal cell cancer. During its pre-NDA meeting with the FDA to discuss the trial’s results, FDA staff expressed concern regarding a negative trend observed in the trial, namely that while tivozanib seemed to slow the progression of the dis- ease, patients taking the drug were dying sooner than patients taking the other study drug. The FDA recom- mended that AVEO conduct a second large-scale, ran- domized study to address these concerns. Despite this recommendation, AVEO submitted an NDA for tivozanib without conducting a second clinical trial. Before the FDA advisory panel’s meeting to consider and vote on AVEO’s NDA, FDA staff released a pre-meeting sum- mary that included its prior recommendation that AVEO conduct a second clinical trial in support of its NDA. On news of the FDA’s recommendation, AVEO’s stock price fell by 31%. The advisory panel subsequently voted against approving tivozanib, and the FDA adopted this recommendation and refused to approve the drug. On May 9, 2013, investors filed suit against AVEO and three of its corporate officers alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act. The complaint alleged that defendants misrepresent- ed their regulatory communications with the FDA and failed to disclose the FDA’s concerns regarding the higher risk of death observed in patients taking tivoza- nib and the FDA’s recommendation that AVEO conduct an additional clinical trial to address these concerns. The court granted defendants’ initial motion to dismiss in March 2015, but granted leave to plaintiffs to file an amended complaint. On November 18, 2015, the court granted defendants’ motion to dismiss the amended complaint, holding that the amended complaint failed to adequately plead scienter as required by the PSLRA. Plaintiffs filed a notice of appeal in December 2015; briefing has not yet been filed with the First Circuit. Notwithstanding the dismissal of the amended com- plaint, on March 29, 2016, the SEC filed a complaint against AVEO and the same three corporate officers alleging violations of the 1933 and 1934 Acts based upon allegations substantially similar to those alleged by the securities class action plaintiffs—i.e., defendants misled investors by failing to disclose the FDA’s rec- ommendation regarding an additional clinical trial and by deliberately employing a communications strategy designed to downplay the possibility of future pre-ap- proval studies. AVEO settled with the SEC, paying a civil penalty of $4 million, without admitting or denying the allegations alleged in the SEC’s complaint. However, the case remains pending against the individual defendants. In April 2016, following the filing of the SEC action, the class action plaintiffs moved to set aside the court’s judgment in light of new evidence presented in the SEC’s complaint, arguing that the evidence supported a strong inference of scienter. On January 3, 2017, the court granted plaintiffs’ motion and vacated the order of dismissal. While recognizing that such relief should “not be freely given” due to the “strong interest in the finality of judgments,” it held that plaintiffs had met their burden to show that such relief was warranted. Spe- cifically, the court found that plaintiffs had adequately established that the SEC complaint was discovered after judgment was entered, and that such evidence could not have been discovered earlier given that plaintiffs were unaware of the SEC’s investigation. After reviewing the new evidence, the court concluded that it was not merely cumulative of other evidence alleged in prior complaints previously deemed deficient by the court. Rather, the newly discovered evidence “strikes at the heart of what the court previously found lacking in the complaint—a strong inference of scienter—as it concerns the divergence of internal reports and exter- nal statements, one of the indicia of scienter that the court found lacking in Plaintiffs’ previous pleadings.” On February 2, 2017, plaintiffs filed a third consolidated amended complaint incorporating the newly discov- ered evidence from the SEC action. Defendants’ deadline to file their answers is March 2, 2017. Electrical Workers Pension Fund, Local 103, Ibew v. Kingsley et al., Case No. 1:16cv12101 (D. Mass.) (Judge F. Dennis Saylor IV) In October 2016, plaintiffs filed a second class action lawsuit against Biogen regarding its MS drug Tecfidera (“Biogen II”), alleging that Biogen and three of its ex- ecutives made false and misleading public statements concerning Tecfidera in violation of Sections 10(b), 20(a) and Rule 10b-5 of the 1934 Act. The Biogen II plaintiffs acknowledged the similarity of their complaint to In re Biogen Securities Litigation (“Biogen I”) complaint, but contended that their complaint includes allegations and facts beyond those raised in Biogen I, as well as a different class period that includes a partial corrective disclosure by defendants. Specifically, plaintiffs allege that in the spring of 2013, one of Tecfidera’s leading prescribers, the MS Institute at Shepherd Center in At- lanta, Georgia (the “Center”), discovered that patients important cases to watch in 2017 goodwin Notwithstanding the dismissal of the amended complaint, on March 29, 2016, the SEC filed a complaint against AVEO and the same three corporate officers alleging viola- tions of the 1933 and 1934 Acts based upon allegations substantially similar to those alleged by the securities class action plaintiffs...