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In re Aveo Pharmaceuticals Inc. Securities Litigation

United States District Court, D. Massachusetts

November 14, 2017

IN RE AVEO PHARMACEUTICALS, INC. SECURITIES LITIGATION

          MEMORANDUM AND ORDER

          Denise J. Casper United States District Judge

         I. Introduction

         This is a putative class action in which the lead class action plaintiffs Robert Levine and William Windham (“Plaintiffs”) allege that Defendants AVEO Pharmaceuticals, Inc. (“Aveo”), its former President, Chief Executive Officer and Director Tuan Ha-Ngoc (“Ha-Ngoc”), Chief Financial Officer David N. Johnston (“Johnston”), Chief Medical Officer William Slichenmyer (“Slichenmyer”) and co-Founder and Director Ronald DePinho (“DePinho”) (collectively “Defendants”), violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, 15 U.S.C. § 78j(b) (“Count I”), and Section 20 of the Exchange Act, 15 U.S.C. § 78t (“Count II”). Plaintiffs have moved for class certification. D. 145. Defendants do not dispute class certification, D. 154 at 5, but do dispute the class period proposed by Plaintiffs. For the reasons set forth below, the Court ALLOWS Plaintiffs' motion for class certification under Fed.R.Civ.P. 23(b)(3) and accepts the class period as proposed by Plaintiffs.

         II. Factual Background

         Unless otherwise noted, the facts recited here are as alleged in the operative, third amended complaint (“TAC”). Plaintiffs are shareholders of Aveo, a “biopharmaceutical company focused on discovering, developing, and commercializing cancer therapies.” D. 117, ¶¶ 1-2. Plaintiffs have brought this class action suit on behalf of “all persons other than defendants who purchased AVEO common stock between May 16, 2012 and May 1, 2013.” Id., ¶ 1. Aveo's lead product is tivozanib, an oral inhibitor of the vascular endothelial growth factor receptors. Id., ¶ 2.

         After completing a Phase 2 trial for tivozanib and having End-of-Phase 2 meetings with the FDA about a Phase 3 trial, D. 117, ¶ 63, Aveo began the Phase 3 trial for tivozanib (“TIVO-1”) in February 2010. Plaintiffs allege that Defendants included a number of defects in the design of TIVO-1, all of which contributed to unreliable results. D. 117, ¶ 68. In May 2012, Aveo, as alleged, had sufficient data from TIVO-1 to be aware of a trend of higher death rates (“overall survival”) among tivozanib patients than control patients. D. 117, ¶ 80. On May 11, 2012, Aveo had a meeting with the FDA prior to filing its new drug application (“NDA”). D. 117, ¶ 81. At that meeting, the FDA expressed concern about the negative overall survival trend in TIVO-1 and further that TIVO-1's design made it unclear whether the results were because tivozanib was in fact toxic and recommended that Aveo conduct a second study prior to filing an NDA. D. 117, ¶ 83.

         On May 16, 2012, Aveo issued a press release announcing positive findings from TIVO-1, including the trial's overall survival results, without referring to the FDA's prior concerns, and encouraging the market to view the data as “preliminary” and/or caused by distorting effects. D. 117, ¶ 88. Similar communication of preliminary TIVO-1 results was repeated by Aveo, Ha-Ngoc and Slichenmyer at a presentation at the American Society of Clinical Oncology on June 4, 2012, including an expression by Slichenmyer that the FDA would not be concerned by the geographic mix of patient sites, which had ultimately been concentrated in Central and Eastern Europe to reduce cost, contrary to prior Aveo disclosures that stressed the importance of “geographically dispersed” test sites to TIVO-1's success. D. 117, ¶¶ 68, 92.

         In or around July 2012, Aveo decided to pursue a second clinical trial and informed the FDA of its decision. D. 117, ¶¶ 95-96. Aveo's public filings during the class period did not disclose the FDA's preference for a second trial, when prior to the class period it had speculated that a single trial would be sufficient. D. 117, ¶ 100. On August 2, 2012, Aveo issued a press release announcing its second quarter 2012 results, and disclosed that the FDA had expressed concern about overall survival trends in TIVO-1, but that Aveo was conducting “additional analyses” that would better contextualize the data in support of its NDA. D. 117, ¶ 97. Johnston shared similar information in multiple conferences, stating that while the FDA had expressed concern about the overall survival trend, analysis was being done to address the FDA's concerns. D. 117, ¶¶ 106, 111, 114, 120. In December 2012, Aveo received a letter from the FDA reiterating its concern that the overall survival trend was “a significant safety concern.” D. 117, ¶ 123. At other conferences during the class period, Defendants described the overall survival results in TIVO-1 as superior to other competitive treatments, and described the four percent gap in overall survival between tivozanib and the control as not statistically significant. D. 117, ¶¶ 124, 140. On January 23, 2013, Aveo raised about $53.6 million in a public offering. D. 117, ¶ 127.

         On February 13, 2013, Slichenmyer disclosed the additional analyses and final overall survival data on an investor conference call, stating Aveo's expectation that this data would be “a subject of discussion” at the ODAC panel meeting. D. 117, ¶ 128. Slichenmyer further stated that while he could not discuss details of Aveo's discussions with the FDA, they were working to “address lots of questions they're sending to us” and expressed his own optimism at their chances of approval. D. 117, ¶ 130. The same final overall survival data was again disclosed as a part of Aveo's Form 10-K annual report for 2012. D. 117, ¶ 135.

         At the end of August 2012, the FDA sent Aveo a response to its proposed study protocol for a second trial, disagreeing with the design. D. 117, ¶ 109. Aveo informed the FDA that it would cancel the meeting that had been scheduled to discuss this proposed study. D. 117, ¶ 110. On September 28, 2012, Aveo issued a press release announcing that it had filed an NDA, which it did without completing a second study. D. 117, ¶¶ 87, 117.

         On April 30, 2013, before the market opened, the FDA released the briefing materials it had shared with the Oncologic Drugs Advisory Committee (“ODAC”). D. 117, ¶ 144. The briefing materials stated that at the May 2012 pre-NDA meeting between Aveo and the FDA, the FDA had expressed concern about the overall survival trend and that it had recommended Aveo conduct a second trial in a population comparable to that of the United States. D. 117, ¶ 144. The briefing materials stated that TIVO-1 had concentrated its study sites in Eastern Europe and that this might mean trial patients had different standards of care and practice patterns than they would have in the United States. D. 117, ¶ 145. The briefing document also cast doubt on Defendants' explanation for the overall survival data, which sought to discount the long-term risks of tivozanib use, and that competitor treatments for renal cell carcinoma had overall survival data that favored approval. D. 117, ¶ 146. That day, Aveo's shares fell 31.31%. D. 117, ¶ 147.

         On May 2, 2013, the ODAC panel held its hearing, which was focused on addressing the FDA's concerns about the TIVO-1 overall survival data. D. 117, ¶ 148. A panel member pointed out, and Slichenmyer confirmed in response, that the negative trend in overall survival should have been apparent within six months of treatment. D. 117, ¶ 149. Other ODAC panel members criticized the TIVO-1 design because it prevented the FDA and the panel from relying on the data to conclude whether the overall survival data was innocuous or, for example, due to tivozanib's toxicity. D. 117, ¶¶ 158-59. Slichenmyer stated at the ODAC hearing that that Aveo had not initially included treatment crossover in its design of TIVO-1 as presented to the FDA and that it was added later without consulting the FDA. D. 117, ¶ 160. All but one of the ODAC panel members voted against recommending tivozanib's approval, concluding that the possibility an overall survival rate lower than the control would not be defensible to potential patients, and that TIVO-1's design was “inadequate.” D. 117, ¶ 164. That day, Aveo's shares fell almost fifty percent. D. 117, ¶ 165.

         III. Procedural History

         Plaintiff Paul Sanders filed a class action complaint on May 9, 2013. D. 1. Plaintiffs subsequently filed the first amended complaint, D. 49, but the Court allowed Defendants' motion to dismiss that pleading without prejudice on March 20, 2015. D. 75. Plaintiffs filed a second amended complaint on April 17, 2015, D. 76-1. On November 18, 2015, the Court allowed Defendants' motion to dismiss the second amended complaint and judgment was entered for Defendants. D. 91; 92. Plaintiffs later moved to set aside that judgment, relying upon newly discovered evidence from a complaint filed by the SEC. D. 96. The Court allowed the motion and vacated the judgment. D. 110. Plaintiffs filed the third amended complaint (“TAC”), the operative complaint, on February 2, 2017. D. 117.

         IV. ...


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