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 168 9 District of massachusetts decisions goodwin the 1934 Act. The complaint alleged that defendants knew beloranib could lead to an increase in the risk of thrombotic adverse events (“AEs”), and that it materially misled investors by failing to disclose two superficial AEs that occurred in one of the company’s prior clinical trials more than one year before the 2015 patient death. Plaintiffs argued that knowledge of thrombotic risks was well known from published scientific articles on the sub- ject, but that Zafgen’s CEO and other executives were motivated by their compensation plans and insider trad- ing opportunities to omit the frequency of thrombotic AEs in an effort to mislead investors. The court granted defendants’ motion to dismiss, holding that plaintiffs had failed to state a claim for securities fraud. The court found that the complaint was devoid of any facts suggesting that Zafgen and its CEO acted intentionally or recklessly to defraud investors, and that the compa- ny’s repeated risk disclosures undercut any cogent and compelling inference of fraud. Referring to plaintiffs’ case as improperly advancing fraud by hindsight, the court labelled plaintiffs’ allegations of intent “subjective, selective, and post-hoc,” and rejected plaintiffs’ motive allegations as “weak.” Plaintiffs have appealed the de- cision to the First Circuit. Briefing has been completed, and oral argument is scheduled for March 7, 2017. Kader v. Sarepta Therapeutics, Inc., No. 1:14-CV- 14318-ADB, 2016 WL 1337256 (D. Mass. Apr. 5, 2016) (Judge Allison D. Burroughs) Sarepta Therapeutics is a biopharmaceutical company focused on developing therapeutics for the treatment of rare and infectious diseases, including eteplirsen, a drug candidate for the treatment of Duchenne Muscular Dystrophy (“DMD”). On April 21, 2014, Sarepta issued a press release announcing its plans to submit an NDA for the approval of eteplirsen by the end of 2014. During a conference call with analysts and inves- tors that same day, Sarepta executives stated that the company’s existing dataset was sufficient to support an NDA filing, but that it would continue to collect data for 6-8 months in an effort to “enhance” its NDA filing. Upon this news, Sarepta’s stock price rose by nearly 40%. In May 2014, the FDA reviewed Sarepta’s clinical trial site and protocols and issued a request for Sarepta to have its primary dataset reassessed by independent pathologists. On October 27, 2014, Sarepta issued a press release announcing that the FDA now required additional data as part of the NDA submission and that the company would be delaying its submission. Follow- ing this announcement, the company’s stock price fell by more than 32%. Three days later, the FDA issued a public statement indicating that it had consistently advised Sarepta that it would need to include data in its NDA demonstrating eteplirsen’s effectiveness, and that the need for additional data was reinforced by the FDA’s inspection of Sarepta’s clinical site. Investors filed suit against Sarepta and four of its current and former executives, alleging that Sarepta had misled investors by continually representing that its existing data would be sufficient to support an NDA, in violation of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act. The court granted defendants’ motion to dismiss, finding that the FDA’s public statement could not support plaintiffs’ alleged inference that the FDA had informed Sarepta about the insufficiency of its data before the company issued its April press release. The court also rejected plaintiffs’ alternative theory that the company’s failure to disclose the FDA’s request for re- assessment constituted a material omission, noting that Sarepta had no duty to disclose the request because there was no final FDA decision to communicate. Rath- er, the request was merely interim feedback from the FDA in the context of an ongoing dialogue regarding Sarepta’s planned NDA submission. Plaintiffs thereafter filed a motion to amend the amended complaint, which the court recently denied on January 6, 2017, holding that leave to amend would be futile because plain- tiffs’ proposed second amended complaint “fail[ed] to address the shortcomings in the Amended Complaint.” The case, thus, has been dismissed with prejudice. On February 3, 2017, plaintiffs appealed the dismissal to the First Circuit; a schedule for the appeal has not yet been set. Harrington v. Tetraphase Pharmaceuticals Inc. et al, Case No. 1:16cv10133 (D. Mass.) (Judge Leo T. Sorokin) Tetraphase Pharmaceuticals is a clinical-stage biophar- maceutical company focused on making antibiotics for drug-resistant bacteria. Tetraphase’s lead product candidate is eravacycline, which the company is devel- oping as an intravenous and oral antibiotic for the treat- ment of multidrug-resistant infections. On September 8, 2015, the company announced that its Phase 3 clinical trial of eravacycline for the treatment of complicated urinary tract infections (“cUTIs”) did not achieve its primary endpoint. Following the announcement, the company’s stock price dropped by more than 80%. On January 28, 2016, investors filed a federal securities class action, alleging that Tetraphase made false and misleading statements regarding the prospects for bringing eravacycline to market. Specifically, the com- plaint alleges that Tetraphase’s press releases, periodic reports, and other public statements were misleading because they failed to disclose that the Phase 3 trial would be a failure and that an NDA never would be filed. Plaintiffs infer defendants’ knowledge of these facts from prior, publicly available third-party studies and from Tetraphase’s own prior studies, which alleged- ly confirm that eravacycline would not be an effective treatment for cUTIs. Plaintiffs also contend that compa- ny executives delayed disclosure of their knowledge so they could sell off their personal holdings before Tet- raphase’s stock price diminished. Defendants moved to dismiss the action on October 14, 2016, and briefing on the motion was completed on January 12, 2017. Gerneth v. Chiasma, Inc. et al, Case No. 1:16cv11082 (D. Mass.) (Judge Denise J. Casper) Chiasma is a late-stage biopharmaceutical compa- ny focused on developing and commercializing oral medications for patients suffering from rare and debil- itating diseases. Chiasma’s lead product candidate is Mycapssa, which is being developed for the treatment of acromegaly, a rare disease that results in the body’s production of excess growth hormone. In March 2012, Chiasma began a single-arm, open-label Phase 3 clin- ical trial of Mycapssa. Later that year, Chiasma entered into a licensing agreement with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc. (together, “Roche”), through which Roche obtained the right to develop and commercialize Mycapssa upon its approval by the FDA. In July 2014, following a pre-NDA meeting with the FDA, Roche terminated its licensing agreement with Chias- ma. According to Chiasma’s then-CEO, Roche walked away from the deal for strategic reasons unrelated to the Phase 3 clinical trial. On June 15, 2015, Chiasma announced that it had submitted an NDA to the FDA seeking approval for the marketing and sale of Mycapssa following completion of its Phase 3 clinical trial. The following month, Chi- asma completed its IPO, selling 7.3 million shares for net proceeds of approximately $106.5 million. In April 2016, Chiasma received a response letter regarding its NDA for Mycapssa, in which the FDA advised the company that it had not provided substantial evidence of efficacy to warrant approval, and that Chiasma would need to conduct another clinical trial to overcome this deficiency. Chiasma announced the FDA’s findings to important cases to watch in 2017 The court also rejected plaintiffs’ alterna- tive theory that the company’s failure to disclose the FDA’s request for reassessment constituted a material omission, noting that Sarepta had no duty to disclose the request because there was no final FDA decision to communicate.