Two investor class-action suits have been filed within days of one another against two different California-based pharmaceutical companies both of which produce hepatitis B treatments, Dynavax Technologies and Arrowhead Pharmaceuticals. The named plaintiffs in both shareholder class-action suits, David Soontjens and Yaki J. Meller, are represented by counsel at Pomerantz, LLP.[1]
Meller v. Arrowhead Pharmaceuticals, Inc., et al., complaint filed (C. D. Cal. Nov. 15, 2016)
On November 15th, named plaintiff Yaki J. Meller filed a Class Action Complaint in the United States District Court for the Central District of California against Pasadena-based Arrowhead Pharmaceuticals, Inc., its President and CEO (Christopher Anzalone), and its CFO (Kenneth Myszkowski). Arrowhead is a biopharmaceutical company that, according to its website, “develops medicines that treat intractable diseases by silencing the genes that cause them.”
Among its clinical stage drugs are ARC-520 and ARC-521, which “are designed to treat chronic hepatitis B virus infection by reducing the expression and release of new viral particles and key viral proteins with the goal of achieving a functional cure.” ARC-520 is the drug at issue. According to the Complaint, Arrowhead knew but failed to disclose that ARC-520 “could be fatal at its higher doses and that the FDA was unlikely to approve the treatment as a result.”[2] In particular, the Complaint alleges that Arrowhead:
made false and/or misleading statements and/or failed to disclose that: (i) the Company’s ARC-520 was unsafe at certain doses and caused deaths in an ongoing primate toxicology study; and (ii) as a result, Arrowhead’s public statements were materially false and misleading at all relevant times.
According to Meller’s Complaint, in so doing, Arrowhead violated Sections 10(b) (“Position Limits and Position Accountability for Security-Based Swaps and Large Trader Reporting.”) and 20(a) (“Liability to contemporaneous traders for insider trading.”) of the Securities Exchange Act of 1934, “Position Limits and Position Accountability for Security-Based Swaps and Large Trader Reporting” and “Liability to contemporaneous traders for insider trading,” respectively, and Securities and Exchange Commission Rule 10b-5, “Employment of manipulative and deceptive devices.”
Timeline of events, per Meller’s Complaint:
- May 11, 2015: Arrowhead announces in regulatory filing that the FDA has approved a Phase 2b study of ARC-520. (Complaint ¶ 19)
- August 2015-August 2016: Arrowhead announced in further regulatory filings that it “had found continued success with ARC-520 in its Phase 2b study.”[3]
- November 8, 2016: Arrowhead issued a press release reporting that the FDA was to place a clinical hold on its clinical study of ARC-520. (Complaint ¶ 22) This was after a study of ARC-520’s effects on chimpanzees showed “that the drug could cause deaths at its highest doses.”[4]
- After the press release: Arrowhead’s share price fell $1.91 (31.26%) to close at $4.20 on November 9, 2016. (Complaint ¶ 23)
Meller is seeking “compensation for investors who purchased Arrowhead’s stock between May 11, 2015, and Nov. 9, 2016.”[5]
Soontjens v. Dynavax Technologies Corp. et al., complaint filed (N. D. Cal. Nov. 18, 2016)
On November 18th, named plaintiff David Soontjens filed a Class Action Complaint in the United States District Court for the Northern District of California against Berkeley-based clinical-stage biopharmaceutical company Dynavax Technologies, its CEO and Director (Eddie Gray), and its Senior VP, CFO, and CBO (Michael S. Ostrach). According to its website, Dynavax is “developing immunotherapies based on cutting-edge Toll-Like Receptor (TLR) biology and its ability to modulate the immune system.” The company develops “vaccines and therapeutic treatments for infectious diseases and cancer.”[6] The drug at issue is Heplisav-B (HBsAg-1018), “an investigational adult hepatitis B vaccine that combines recombinant hepatitis B surface antigen with 1018, [Dynavax’s] proprietary adjuvant.”
According to Soontjens’s Complaint, Dynavax, et al., “made materially false and/or misleading statements and/or failed to disclose” that:
- There were significant issues (“including an imbalance in the number of cardiac events during use”) associated with Heplisav-B;
- A commercial product launch of Heplisav-B was less imminent than Dynavax led Soontjens and other investors to believe; meaning that
- Dynavax public statements were materially false and misleading throughout the 32-month period ending on November 11 of this year. (Complaint ¶ 67)
According to Soontjens, the truth came to light on November 14 of this year when Dynavax disclosed that it received a complete response letter (CRL) from the FDA requesting further information related to said cardiac events. (Complaint ¶ 68) It was at this point that Dynavax’s share price fell $7.50 (64.65%) to close at $4.10 that same day.
The Complaint alleges that Dynavax violated the antifraud provisions of the Securities Exchange Act—Sections 10(b) and 20(a), as well as Securities and Exchange Commission Rule 10b-5.
Soontjens is seeking “compensation for investors who bought Dynavax securities during a 32-month period ending Nov. 11” of this year.[7]
This Complaint has been brought against Dynavax just as it is preparing to settle a different shareholder suit, In re Dynavax Techs. Corp. Sec. Litig., No. 13-cv-2796, having received preliminary approval of a $4.5M settlement in a shareholder class-action suit which alleged that “Dynavax and former executives failed to disclose that its 2012 licensing application for the vaccine did not include adequate manufacturing data.”[8]
I’ll be keeping an eye out for further developments in these two cases, so check back for updates and analysis.
[1] David Soontjens is also represented by Peretz Bronstein of Bronstein, Gewirtz & Grossman, LLC.
[2] Drugmaker misrepresented safety of hepatitis treatment, suit says, 2016 WL 6817179.
[3] Drugmaker misrepresented safety of hepatitis treatment, suit says, 2016 WL 6817179. See also, Complaint ¶¶ 24-48.
[4] Drugmaker misrepresented safety of hepatitis treatment, suit says, 2016 WL 6817179.
[5] Drugmaker misrepresented safety of hepatitis treatment, suit says, 2016 WL 6817179.
[6] Drugmaker hid problems with hepatitis B vaccine, investor suit says (N.D. Cal.), 2016 WL 6884228.
[7] Drugmaker hid problems with hepatitis B vaccine, investor suit says (N.D. Cal.), 2016 WL 6884228.
[8] Drugmaker hid problems with hepatitis B vaccine, investor suit says (N.D. Cal.), 2016 WL 6884228.