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 162 The number of securities class actions filed nationally against publicly traded pharmaceutical, biotechnology, medical device and health care product and services companies (collectively referred to herein as “life sciences and health care companies”) has steadily grown over the last few years, with 2016 being the most active year by far to date. As depicted in the chart below, in 2016, 80 securities class actions against life scienc- es and health care companies were filed in federal courts nationwide, as compared to 43 such actions in 2015.1 These cases are typically filed by shareholders seeking to recover investment losses after a company’s stock price drops following the disclosure of a setback or problem ex- perienced by the company with respect to its drugs or products, such as concerns or negative comments from the FDA, trial delays, suspensions or terminations, adverse events experienced by patients, or manufacturing problems. Plaintiffs typically assert claims under Sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 (the “1934 Act”) based upon allegedly false and misleading statements made by the company and its officers and/or directors, and, if the alleged misstatements or omissions are made in connection with a securities offering, under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the “1933 Act”). This uptick in 2016 in securities class actions against life sciences and health care companies may be in part attributable to the Securities and Exchange Commission’s (“SEC”) public focus on life sciences and health care companies and, in particular, their disclosures concerning communi- cations and interactions with the FDA. In March 2015, Andrew Ceresney, Director of Enforcement for the SEC, publicly stated in a speech at CBI’s Pharmaceutical Compliance Congress in Washington, DC: “One significant type of key event that we see causing problems with disclosure in your in- dustry is disclosures on your dealings with the FDA. Accuracy of reporting in your dealings with the FDA is critical to getting investors the information they need. FDA dealings and approvals are the lifeblood of your business and are so important to investment decisions. And our cases, some of which relate to failures in this area, reflect this.” The SEC v. AVEO Pharma- ceuticals, Inc. action discussed below is an example of one such enforce- ment action filed by the SEC in the District of Massachusetts in 2016. The District of Massachusetts and the First Circuit have been among the most active jurisdictions in the country for securities class actions filed Introduction Note: 1. Sectors and subsectors are based on the Bloomberg Industry Classification System. 2. The Other category is a grouping primarily encompassing the Agriculture, Beverage, Commercial Services, and Food subsectors. © 2017 Cornerstone Research. All rights reserved. 0 20 40 60 80 100 120 Year 2016 Year 2015 Year 2014 Average 1997-2015 Biotechnology Pharmaceuticals Healthcare Other 15 8 12 27 12 6 21 27 12 15 26 14 19 19 16 29 32 42 43 80 Consumer Non-Cyclical Sector Filings 2014–2016 against life sciences and health care companies, with 13 such actions having been filed in 2015 and 2016 in the District of Massachusetts.2 In 2016 and thus far in 2017, federal district courts in the District of Massachusetts and the First Circuit have issued several significant, detailed decisions dismissing virtually all claims against life sciences and health care companies and their directors and/or officers. Specifi- cally, the First Circuit issued two decisions in 2016 and a third decision in early January 2017 in which it affirmed dismissal of all but one 1934 Act claim, providing guidance on the pleading standards applicable to such claims under the Private Securities Litigation Reform Act (“PSLRA”), and on which shareholders have standing to sue under the 1933 Act. Courts within the District of Massachusetts issued five deci- sions dismissing securities claims with prejudice in 2016, providing in-depth analyses of the intent or “scienter” requirement of 1934 Act claims in particular. These decisions and pending cases in which we expect significant decisions to be issued in 2017 are summarized below, with the goal of providing you with an overview of the legal landscape to assist you in making informed disclosure decisions. 1 Source: Cornerstone Research Securities Class Action Filings 2016 Year in Review; filings data is as of December 31, 2016. Sectors and subsectors are based on the Bloomberg Industry Classification System. 2 Id. First Circuit Decisions 4 District of Massachusetts Decisions 6 Important Cases to Watch in 2017 9 Authors 14 Industry Rankings and League Tables 15 Table of contents