Norfolk Pension Fund’s class action case recovers in excess of £42.5m

A successful class action against a US pharmaceuticals company that saw the UK’s Norfolk Pension Fund serve as the lead plaintiff has recovered in excess of £42.5m (US $55m) for investors.

As reported in our sister publication, European Pensions, the original ruling in February 2019 saw the jury in the United States District Court for the Central District of California in Santa Ana, California find Puma Biotechnology Inc (Puma) and the company’s CEO, Alan Auerbach, liable for securities fraud.

It has now been announced that in September this year, a court-appointed administrator confirmed the claims of more than 4,600 individual and institutional investors defrauded by Puma Biotechnology and Auerbach.

The company was found to have made false and misleading statements about the efficacy of Puma Biotechnology’s only product, the drug now known as Nerlynx. The jury’s verdict, finding that a company and its CEO violated the federal securities laws, is the first such verdict since 2011 in a §10 class action brought under the Private Securities Litigation Reform Act of 1995.

Following the jury verdict, Puma Biotechnology shareholders were given 120 days to file claims. Subsequently, the claims administrator, Gilardi & Co., validated the filed claims and calculated the damages suffered by investors based on the jury’s finding that the defendants’ fraud had artificially inflated Puma Biotechnology’s stock price by $4.50 (£3.47) per share – nearly half of Puma’s stock price, which currently trades for less than $10 (£7.73) per share.

The claim forms identify that more than 11.3 million shares of Puma Biotechnology common stock were damaged as a result of defendants’ fraudulent conduct. The number of damaged shares far exceeds the estimates defendants represented in multiple Securities and Exchange Commission filings since the jury’s fraud finding.

The total damages based on the claims, including interest that has been awarded by the court as a result of defendants’ intentional violations of the federal securities laws, exceeds £42.5m ($55m). The damages due to investors represent the majority of Puma Biotechnology’s reported cash on hand and is not covered by any insurance policy.

The claimed damages are more than three to six times what defendants have told Puma Biotechnology shareholders to expect as a result of the jury verdict. In multiple Securities and Exchange Commission filings, defendants represented that total damages would only be £7m-£13.9m ($9m-18m) – representations defendants continued to make even after receiving reports from the claims administrator that damages would exceed £38.6m ($50m).

Robbins Geller Rudman & Dowd’s, Jason Forge, who led the trial team on behalf of lead plaintiff Norfolk Pension Fund, stated: “Puma seems no more able to change its culture than a tiger can change its stripes. After spending tens of millions of dollars on an army of lawyers, a jury unanimously found that Puma and Alan Auerbach committed fraud, and now they have to pay far more than what they told investors this defeat would cost.”

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