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 166 7 regurgitation. In June 2014, CardiAQ Valve Technolo- gies, Inc. sued Neovasc for trade secret theft in relation to the Tiara. Following a trial, the jury awarded CardiAQ a $70 million verdict against Neovasc for trade secret violations, causing Neovasc’s stock price to drop by 75%. Neovasc investors immediately filed a class action complaint against the company, alleging that it had misled investors about the likely outcome of the case and failed to warn investors about the risks of loss at trial in violation of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act. The district court granted Neo- vasc’s motion to dismiss, finding that the defendants’ statements in various SEC filings and in an earnings call regarding the outcome of the litigation were se- curely within the PSLRA’s “safe harbor” because (1) the statements were forward-looking in that they were predictions of the lawsuit’s future outcome; and (2) the earnings call and filings either provided or referred to detailed warnings about the “very litigation at issue” that easily satisfied the requirement for “meaningful cautionary statements” under the PSLRA’s safe harbor. Because the court found the safe harbor to apply, it held that the “actual state of mind of the defendant” was irrelevant. On December 20, 2016, plaintiffs moved to vacate the court’s dismissal order to provide for dismissal without prejudice, and for leave to amend the complaint. On January 12, 2017, the court denied plaintiffs’ motion. Cody v. Conformis, Inc., No. CV 15-13295-GAO, 2016 WL 4132204 (D. Mass. Aug. 3, 2016) (Judge George A. O’Toole, Jr.) ConforMIS, Inc. is a medical device company that develops and manufactures customized joint replace- ment implants. Both before and after its July 2015 IPO, the company was in the process of transitioning its manufacturing to a new facility, and following the IPO, the company also transitioned its post-manufacturing sterilization process to a new third-party vendor. On an August 2015 earnings call, ConforMIS executives disclosed that the company had made “solid (opera- tional) progress” and reduced its “manufacturing and overhead” through its move to the new manufacturing facility. Several weeks later, the company announced a voluntary recall due to a manufacturing issue related to the sterilization of its products, which caused the com- pany to revise its 2015 revenue forecasts. ConforMIS’ stock price subsequently dropped by nearly 25%. Investors filed a class action against ConforMIS and two of its executives, alleging violations of Section 10(b) and Rule 10b-5 of the 1934 Act, as well as Sections 11 and 15 of the 1933 Act. The complaint alleged that ConforMIS and the individual defendants failed to warn investors in its registration statement and an earnings call that the company’s manufacturing process was flawed in advance of the IPO. In a sharply worded decision, the court dismissed plaintiffs’ claims, holding that the com- plaint did not meet the pleading standards under the PSLRA. The court noted that the complaint contained no allegations that the issue resulting in the recall was happening at the time the company filed its registration statement. Rather, the court held, the manufacturing changes around the time of the IPO “undermined the plausibility that even a person with perfect knowledge [of the Company’s operations] could have anticipated the . . . recall.” Brennan v. Zafgen, Inc., No. CV 15-13618-FDS, 2016 WL 4203413 (D. Mass. Aug. 9, 2016) (Judge F. Dennis Saylor IV) Zafgen is a clinical-stage biopharmaceutical company dedicated to developing novel therapies for patients affected by metabolic diseases. In 2015, Zafgen began a Phase 3 clinical trial for its drug product candidate beloranib, an angiogenesis inhibitor developed for the treatment of a rare genetic disorder. On October 14, 2015, Zafgen announced that it had learned of a patient death in its ongoing Phase 3 trial, and two days later, the company disclosed that the FDA had placed belo- ranib on partial clinical hold. Following these announce- ments, Zafgen’s stock price fell by more than 50%. Investors filed suit against Zafgen and its CEO, alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of District of massachusetts decisions goodwin In re Biogen Inc. Securities Litigation, No. CV 15-13189-FDS, 2016 WL 3541538 (D. Mass. June 23, 2016) (Judge F. Dennis Saylor IV) Biogen Inc. is a global biopharmaceutical company that develops, manufactures, and markets treatments for multiple sclerosis (“MS”), among other diseases. Its highest grossing product in 2015 was Tecfidera, an MS treatment approved for use in both the United States and Europe. During an October 2014 earnings call, Biogen disclosed that an MS patient who had taken Tecfidera as part of a clinical study had recently died of an infection related to her treatment. Biogen’s CEO assured investors that despite this news, the drug’s “overall positive benefit risk profile . . . remain[ed] unchanged.” During the call, Biogen also announced its third-quarter financial results, including a 3.7% increase in revenues from the previous quarter. While Tecfidera’s growth rate for the quarter had decreased significant- ly from its growth rates in the previous four quarters, Biogen remained confident in Tecfidera’s sales, and the company continued to project double-digit revenues in its 2015 guidance. Beginning in the first quarter of 2015, however, Biogen experienced a decline in both its overall revenues and Tecfidera revenues, due in part to its announcement of the patient death in 2014. Biogen ultimately revised its revenue guidance for 2015, indi- cating that its expected reacceleration of Tecfidera had not happened to an appreciable extent. Biogen’s stock price dropped by 22%. Investors filed a class action alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act, claiming that Biogen and three of its executives made false or misleading statements regarding Tecfidera during various earnings calls and confer- ences, artificially inflating the company’s stock price. Relying on statements by 10 former Biogen employees acting as confidential witnesses, the complaint alleged that Biogen withheld material information about declining Tecfidera sales and the impact of the patient death, and made misleading positive statements about future revenue. The court granted defendants’ motion to dismiss, holding that (1) statements regarding Tecfid- era’s expected revenue growth and contribution to the company’s overall market growth were forward-look- ing statements accompanied by adequate cautionary language to fall within the PSLRA’s safe harbor; (2) many of the allegedly false or misleading statements made by executives were non-actionable expressions of cor- porate optimism or puffery; and (3) while the complaint sufficiently alleged that at least one or more of the corporate executives’ statements were false or mislead- ing, the allegations were insufficient to support a strong inference that the executives acted with an intent to defraud investors or with recklessness. Following dis- missal, investors moved to vacate the order of dismissal and for leave to the amend complaint. The court denied their motion in September 2016, and plaintiffs have since appealed the decision to the First Circuit. Briefing is scheduled to be completed by February 17, 2017. Grobler v. Neovasc Inc., 2016 WL 6897760 (D. Mass. Nov. 22, 2016) (Judge Richard G. Stearns) Neovasc Inc. is a biotech firm that develops, manufac- tures, and sells products for cardiovascular disease, including the Tiara, a transcatheter mitral valve implantation technology for the treatment of mitral DISTRICT OF MASSACHUSETTS DECISIONS The earnings call and filings either provided or referred to detailed warnings about the “very litigation at issue” that easily satisfied the requirement for “meaningful cautionary statements” under the PSLRA’s safe harbor.