Northern District Of California Dismisses Class Action Against Biopharmaceutical Company Alleging Fraud Based On Undisclosed Problems With Hepatitis B Vaccine In Trials And FDA Approval Process

On June 4, 2018, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California dismissed with prejudice a class action alleging that Dynavax Technologies Corporation ("Dynavax" or the "Company") and its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by alleging omitting information about its hepatitis B vaccine. In re Dynavax Securities Litigation, No. 4:16-cv-06690-YGR (N.D. Cal. June 4, 2018). The Court's decision is another in a long line of decisions declining to find a securities violation when a pharmaceutical company is alleged to have concealed adverse developments in clinical trials.

Dynavax develops products designed to prevent infectious diseases such as hepatitis. The Company submitted an initial biologistics license application for an investigational hepatitis B vaccine (HBV-23), which the FDA rejected in 2012 because of safety concerns. The Company then implemented a clinical trial to evaluate the vaccine's safety. In late 2015, data from the HBV-23 trial revealed a numerical imbalance in a small number of cardiac events. Defendants expanded work on the data and consulted with external experts. Meanwhile, in January and March of 2016, the Company announced positive preliminary trial results and plans to submit a revised application. The Company said that safety endpoints set for the trial had been met and that rates of clinically significant adverse events were consistent with randomization. In late March, the Company announced that the FDA accepted its application for review. However, on September 2, the FDA cancelled the next step in the approval process, and the Company's stock price declined from $15.94 to $10.91. Then, on November 7, the Company announced that the FDA was seeking more information about the imbalance in the HBV-23 study, and the Company's stock price declined by 64%.

The Court dismissed plaintiff's claim, finding that plaintiff failed to allege that the omission of the cardiac events data rendered any statements false or misleading at the time they were made...

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