In re ARIAD Pharmaceuticals, Inc. Securities Litigation

ARIAD Pharmaceuticals, Inc. (ARIAD) was developing the drug ponatinib to treat leukemia and began a clinical trial for patients resistant to other treatments (second-line patients). Interim data through July 2012 included incidents of arterial thrombosis in 8 percent of patients. ARIAD launched a new trial for patients who had never been treated (front-line patients). In December 2012, ARIAD announced that the U.S. Food and Drug Administration (FDA) had approved ponatinib for second-line patients conditioned on ARIAD affixing a warning label and submitting 12 months of follow-up data. The announcement included the 8 percent arterial-thrombosis rate. In January 2013, ARIAD conducted a secondary common-stock offering. ARIAD submitted data in August indicating that the arterial-thrombosis rate had increased and subsequently announced that the front-line trial had been terminated and ponatinib’s marketing suspended. ARIAD’s share price fell after each announcement. A class action was filed on behalf of those damaged by acquiring stock pursuant or traceable to ARIAD’s secondary offering (the shareholders) (plaintiffs). The complaint alleged, inter alia, that ARIAD and its officers and directors (collectively, the issuer) and underwriters (defendants) violated § 11 of the Securities Act of 1933 by failing to disclose in the offering materials the increase in adverse events between July and January. The issuer and underwriters moved to dismiss, arguing that the shareholders (1) lacked § 11 standing because they did not sufficiently trace their shares to the secondary offering and (2) failed to adequately plead that the alleged omissions were true and known at the time of the offering.