JEFF SMALL, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
VANDA PHARMACEUTICALS INC. et al., Defendants. TUAN HOANG, On Behalf of Himself and All Others Similarly Situated, Plaintiff,
VANDA PHARMACEUTICALS INC. et al., Defendants. Re Document Nos. 11, 12, 6
Granting Motion to Consolidate Cases; and Appointing Lead Plaintiff and Lead Counsel
Before the Court are the motions of two movants, each seeking to be appointed as lead plaintiff and to have their counsel appointed lead counsel, in a putative securities fraud class action brought under the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The movants also seek consolidation of the two above-captioned lawsuits. Because the cases involve common questions of law and fact, the Court will grant the parties’ motions to consolidate. As set forth more fully below, because Movant Darryl McCall has the largest financial interest and is entitled to a presumption favoring the counsel of his choice, the Court will appoint Mr. McCall as lead plaintiff and his counsel, Faruqi & Faruqi LLP and Finkelstein Thompson LLP, as lead and liaison counsel, respectively.
II. FACTUAL BACKGROUND
Vanda Pharmaceuticals Inc. (“Vanda”) is a biopharmaceutical company whose common stock trades on the NASDAQ Global Stock Market under the ticker symbol VNDA. See Compl. ¶¶ 2, 16, ECF No. 1. Its focus is on the development and commercialization of drugs and products for the treatment of disorders of the human central nervous system. See Id . ¶ 2.
This litigation is centered on representations made by Vanda and its officers relating to Tasimelteon, an oral compound currently in Vanda’s product pipeline for treatment of Non-24-Hour Disorder (“Non-24”). Non-24 is a rare circadian rhythm disorder that affects many totally blind individuals. See Id . ¶ 3. Because these individuals lack the ability to perceive light and dark periods of day and thus process the periodic stimuli, their “internal clocks” are often not synchronized to the “normal” 24-hour social cycle, whereby people sleep at night and wake during the day. See Id . ¶ 4. The goal of Tasimelteon is to treat Non-24 by aligning the brain’s wave and hormone rhythms to the normal 24-hour social day—a process known as “entrainment.” See Id . ¶¶ 4–5.
According to the allegations contained in the complaint, Vanda and its officers issued materially false or misleading statements about Tasimelteon’s efficacy and the results of its Phase III clinical trials. Specifically, it is alleged that Vanda (1) changed the design of the primary Phase III study several times, including a complete replacement of the primary endpoint one month before results were announced, because the company was in possession of data suggesting that the original primary endpoint was not going to be met; (2) used a replacement primary endpoint that had never been used before in sleep-drug clinical trials and was not endorsed by the FDA; (3) enrolled patients in the Phase III trials by “stretching” the clinical definition of Non-24; and (4) combined data from two Phase III studies in order to demonstrate a benefit for Non-24 patients, where the two Phase III studies failed individually. See Id . ¶¶ 6–7.
The complaint also alleges that on June 19, 2013, TheStreet.com, a financial news website, published an article raising doubts about the efficacy and quality of the trial procedure and test data for Tasimelteon and noted, among other things, the multiple changes in the primary endpoint over the course of the Phase III trials. See Id . ¶ 8. That same day, Vanda shares declined more than 22 percent, closing at $8.51 per share. See Id . ¶ 9.
On June 24, 2013, Plaintiff Jeff Small filed a putative class action complaint on behalf of all persons who purchased Vanda stock between December 18, 2012, and June 18, 2013, (the “Class Period”) against Vanda; its President and Chief Executive Officer, Mihael H. Polymeropoulos; its Senior Vice President and Chief Financial Officer, James P. Kelly; and its Senior Vice President and Chief Medical Officer, Paolo Baroldi. See generally Compl. The complaint pleads securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (2012), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (2013); and control person liability as to the individual defendants pursuant to Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a) (2012). On July 8, 2013, Plaintiff Tuan Hoang filed another putative class action complaint against Vanda, Mr. Polymeropoulos, and Mr. Kelly, containing similar allegations and covering the same Class Period. See generally Complaint, Hoang v. Vanda Pharms. Inc., No. 13-cv-1028 (D.D.C. July 8, 2013), ECF No. 1.
On June 25, 2013, counsel for Mr. Small published via Globe Newswire a notice of the pending lawsuit that informed members of the putative class that they “have until August 24, 2013[, ] to ask the Court to appoint [them] as Lead Plaintiff for the class.” Lieberman Decl. Ex. A at 1, ECF No. 12-3; see also 15 U.S.C. § 78u-4(a)(3)(A)(i) (2012) (requiring such notice). Timely, competing motions for appointment as lead plaintiff were filed by Mr. Small and Movant Darryl McCall, who each also sought to have their respective attorneys appointed as lead counsel. See generally McCall Mot., ECF No. 11; Small Mot., ECF No. 12. The parties also seek to consolidate the separate actions filed by Mr. Small and Mr. Hoang.
III. MOTION TO CONSOLIDATE CASES
Under the PSLRA framework, the Court is to first rule on any pending motions for consolidation before appointing a lead plaintiff. See 15 U.S.C. § 78u-4(a)(3)(B)(ii) (2012). The Federal Rules of Civil Procedure allow courts to consolidate actions where they involve common questions of law or fact. See Fed. R. Civ. P. 42(a)(2); see also Blackmoss Invs., Inc. v. ACA Capital Holdings, Inc., 252 F.R.D. 188, 190 (S.D.N.Y. 2008) (consolidating multiple class action securities fraud cases).
Consolidation in this case is uncontested, and for good reason. The two pending complaints both claim securities fraud under Section 10(b), Rule 10b-5, and Section 20(a); arising out of the same alleged misrepresentations relating to Tasimelteon and its Phase III clinical trials; on behalf of the same putative class; over the same class period. See supra Part II. ...