b'LSI Design & Integration Corp. v. Tesaro,results monthly, and that management knew sales were Inc., Case No. 18-cv-12352 (LTS), 2020lagging behind internal goals. WL 1027773 (D. Mass. March 30, 2020)The court granted defendants motion to dismiss, Liquidity Concerns holding that (1) plaintiffs failed to adequately allege that the statements at issue were false or misleading, and Before its acquisition by GlaxoSmithKline plc, Tesaro,independently, (2) plaintiffs failed to allege facts sup-Inc. (Tesaro) was a publicly traded oncology-focusedporting a strong inference of scienter. With respect to biopharmaceutical company focused on cancer ther- falsity, the court concluded that statements that Tesaro apies and oncology supportive care products. As ofhad adequate cash did not misleadingly suggest that November 2016, Tesaro had commercialized only onethe company would not conduct another public offering drug approved by FDA: Varubi, which was intended toin the near term. The court further held that the alleged prevent nausea and vomiting associated with chemo- missed sales goals did not bolster plaintiffs claims therapy. Varubi generated approximately $5 million in sales in 2016.In November 2016, the company and its officers madeAccording to the court, the complaint at several public statements about the financial health ofbest alleged that Tesaro and its leadership Tesaro. For example, in its Form 10-Q, the company stated that its cash on hand and the cash expectedknew about missed internal sales goals for from sales of Varubi were expected to be sufficient toVarubi in North America, but it did not show meet our existing cash flow requirements and fund our existing operations at their currently planned levelshow this knowledge suggested that any of for at least twelve months. Later that month, Tesarosthe statements by defendantsfocusing CEO stated that the company finished up the third quarter with almost $650 million in cash. So were wellon the company as a wholewere issued positioned to take this forward. He also stated thatwith intent to deceive.Varubi itselfcan pretty much cover over time all of our expenses. So, from that point forward, anything else we put into the sales force is really economic leverage. Later that month, however, Tesaro announced that itbecause the amended complaint did not explain the would initiate a secondary stock offering to fund furtherconnection between these internal targets, Tesaros operations and filed a registration statement with theplans for procuring additional capital through public SEC. After a columnist reported that there was onlyofferings, and its overall financial health. The court light demand for the offering, Tesaro announced thatalso concluded that the CEOs statements were either it was pricing the offering at $135 per share, approx- a non-actionable statement of corporate optimism or imately 9% lower than the closing price the previousforward-looking and protected by the PSLRAs safe har-day, and Tesaros share price fell on that news. bor. With respect to scienter, the court independently Investors then filed a putative class action complaintconcluded that plaintiffs had not alleged particularized against Tesaro, its CEO, and its CFO in the District offacts supporting a strong inference that defendants Massachusetts, alleging violations of Sections 10(b) andmade the allegedly misleading statements with intent 20(a) of the 1934 Act, as well as Rule 10b-5 promulgat- to defraud or extreme recklessness. According to the ed thereunder. The amended complaint alleged thatcourt, the complaint at best alleged that Tesaro and the statement in Tesaros November 2016 10-Q andits leadership knew about missed internal sales goals the two November 2016 statements by the companysfor Varubi in North America, but it did not show how CEO were materially misleading because the compa- this knowledge suggested that any of the statements ny knew it was in trouble after missing internal salesby defendantsfocusing on the company as a whole goals for Varubi, yet continued falsely to assure inves-were issued with intent to deceive. Instead, the court tors that it had adequate cash to fund its existing op- credited the innocent inference that Tesaro believed erations based on revenue generated by Varubi alonethat statements about the sufficiency of its cash andwithout conducting a secondary public offering. Thecash equivalents were accurate and that those state-amended complaint alleged that, according to a confi- ments were not intended to foreclose the possibility of dential witness who had been responsible for sales ofan imminent second public offering.Varubi in California, the drug had achieved only 53%Plaintiffs moved to file a second amended complaint and 67% of its sales goals in the second and third quar- in January 2020. On March 3, 2020, the court denied ters of 2016, respectively. Another confidential witnessplaintiffs motion to amend, reasoning that the proposed claimed that Tesaros senior leadership discussed theseamendment was futile because plaintiffs additional 16'