February 04, 2019
A jury in the United States District Court for the Central District of California reached a unanimous verdict on February 4, 2019 awarding a miniscule damages amount in the first federal securities class action to reach a verdict in nearly 10 years.
Latham represents Puma Biotechnology, Inc., a biopharmaceutical company, and its CEO Alan Auerbach in a securities class action filed in the United States District Court for the Central District of California. Plaintiffs claimed that four statements made in connection with Defendants’ July 2014 announcement of positive top-line results from a Phase III clinical trial of its breast cancer drug, neratinib, were false and misleading and led to two stock drops in 2015 when the results of the clinical trial were presented at a medical conference. The trial began on January 15, 2019, and concluded on January 29. After four days of deliberation, the jury returned a unanimous verdict finding entirely in Defendants’ favor with respect to three of the four statements and with respect to one of the two stock drops. As to the fourth statement, the jury found liability such that certain shareholders who purchased stock between July 22, 2014, and May 13, 2015, may recover no more than US$4.50 per share, representing less than 5% of the claimed damages. In order to recover any of that amount, absent class members must submit claims and prove their entitlement to a recovery. Under Plaintiffs’ two-trader model, approximately 10 million shares were traded during the period and would therefore be eligible for a claim. Historically, the number of shareholders who submit proof of claims sufficient to recover is typically only 20% to 40% of the shares that were traded in the relevant period. Based on these assumptions, total claims could range from US$9 million to US$18 million.
Because the case proceeded as a class action, Plaintiffs’ estimated potential class-wide damages exceeded US$1.1 billion. Given the complexity of the issues and the potential exposure, Section 10(b) securities class actions are rarely tried to a jury, but are often settled for 10 percent or more of claimed damages. Nationwide, there have been only two Section 10(b) cases of this size and nature that have proceeded to a jury verdict this century.
Regarding the single statement as to which the jury found liability, Puma disagrees with the verdict and intends to appeal.
Neratinib was approved by the US Food & Drug Administration in July 2017 and is being sold under the brand name NERLYNX®. Puma presented evidence at trial that neratinib is saving the lives of breast cancer patients across the country. The evidence at trial also demonstrated that no Puma executive or director sold any stock or otherwise profited during the class period, and that all of the money raised by the Company in a secondary offering that occurred during the class period was spent on cancer research.
Perhaps unprecedented in litigation of this magnitude, six female lawyers examined witnesses and argued motions throughout the course of the trial: partners Michele Johnson, Colleen Smith, and Sarah Tomkowiak and associates Kristin Murphy, Meryn Grant, and Jordan Cook.
The Latham team is led by partners Andrew Clubok and Michele Johnson, along with partners Colleen Smith and Sarah Tomkowiak and associates Kristin Murphy, Meryn Grant, Amanda Betsch, Jordan Cook, Clayton LaForge, Wes Horton, Allie O’Hara, Andrew Dane, and Remy Lamons.