Full Press Release Details
KEVIN A SEELY (199982)
600 B Street, Suite 1900
Telephone: (619) 525-3990
Facsimile: (619) 525-3991
Counsel for Plaintiff Arnaud van der
Gracht de Rommerswael
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
This Stipulation of Settlement, dated September 28, 2018 (the
Stipulation ), is made and entered into by and among the following Settling Parties,1 by and through their respective counsel of record: (i) plaintiffs Arnaud van der Gracht de
Rommerswael and Paul Duran (collectively, Federal Plaintiffs ), individually and derivatively on behalf of nominal defendant Puma Biotechnology ( Puma or the Company ); (ii) plaintiffs Xing Xie and Kevin
McKenney, individually and derivatively on behalf of Puma (collectively, State Plaintiffs ); (iii) Alan H. Auerbach, Charles R. Eyler, Jay M. Moyes, Troy E. Wilson, Adrian M. Senderowicz, Frank E. Zavrl, Thomas R. Malley
(collectively, the Individual Defendants ); and (iv) Puma. This Stipulation is intended by the Settling Parties to fully, finally, and forever resolve, discharge, and settle the Released Claims, subject to the terms and conditions
Puma is a biopharmaceutical company that has focused its efforts almost entirely on developing and marketing the drug,
NERLYNXTM ( neratinib ), a drug designed to treat patients with human epidermal growth factor receptor 2-positive breast cancers. The derivative claims arise from allegedly false and misleading statements regarding neratinib s safety
and efficacy (and corresponding likelihood to receive approval from the U.S. Food and Drug Administration ( FDA )) and other alleged wrongdoing occurring between February 2014 and the dates Plaintiffs filed their derivative actions (the
Relevant Time Period ).
On June 3, 2015, Puma investors filed a securities class action, entitled Hsu v. Puma Biotechnology, Inc.,
No. 8:15-cv-00865-AG-SHK (the Securities Action ), which is pending in the Central District of California before the Honorable Andrew J.
1 All capitalized terms not otherwise defined are defined in section V.1.
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
Guilford. Judge Guilford denied defendants motions to dismiss the Securities Action on September 30, 2016, and July 25, 2017, respectively, and granted plaintiff s motion for
class certification on December 8, 2017. The defendants in the Securities Action filed their motion for summary judgment on July 10, 2018, which is set for hearing on September 24, 2018.
On April 12, 2016, after significant analysis and investigation into the alleged wrongdoing, plaintiff Xing Xie
( Xie ) filed a Verified Stockholder Derivative Complaint for Breach of Fiduciary Duty, Unjust Enrichment, Abuse of Control, Gross Mismanagement, and Waste of Corporate Assets, alleging that demand on the Puma Board to investigate the
misconduct and take legal action against the individuals responsible was futile, in the Los Angeles Superior Court (the Superior Court ), titled Xie v. Auerbach, Case No. BC616617 (Cal. Super. Ct.-L.A. Cty.). On April 14,
2016, plaintiff Kevin McKenney ( McKenney ) filed a factually-similar derivative action in the Superior Court, titled McKenney v. Auerbach, Case No. BC617059 (Cal. Super. Ct.-L.A. Cty.). On June 21, 2016 the Xie and McKenny
actions were consolidated (the State Actions ). The State Actions have been stayed since June 21, 2016, pending resolution of the Securities Action. Pursuant to the terms that were negotiated in the stipulation to stay that was
granted by the Superior Court, Defendants provided counsel in the State Actions with several hundred thousand pages of Bates-stamped documents that were produced in connection with the Securities Action.
On August 29, 2017, after significant analysis and investigation into the alleged wrongdoing, including investigation into
whether the Puma Board was sufficiently independent to consider a litigation demand, plaintiff Arnaud van der Gracht de Rommerswael ( van der Gracht de Rommerswael ) sent a litigation demand letter to
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
the Board demanding that it engage independent outside legal counsel, investigate the
misconduct, and take legal action against the individuals responsible ( Litigation Demand ). The Litigation Demand was rejected by the Board through a letter dated January 9, 2018.
On February 9, 2018, van der Gracht de Rommerswael filed his Verified Stockholder Derivative Complaint for Violation of
Securities Law, Breach of Fiduciary Duty, Waste of Corporate Assets, and Unjust Enrichment in the Central District of California, alleging that the Litigation Demand was wrongfully refused (the van der Gracht de Rommerswael Action ).
Plaintiff van der Gracht de Rommerswael alleges that the Board failed to perform a good faith, independent investigation of the claims contained in the Litigation Demand, but instead based its decision to reject the Litigation Demand on a biased
investigation previously conducted by counsel for Puma to develop a defense in the Securities Action.
de Rommerswael Action is pending before Judge Guilford, who is also presiding over the Securities Action.
2018, after significant analysis and investigation into the alleged wrongdoing, plaintiff Paul Duran ( Duran ) filed a Verified Stockholder Derivative Complaint for Breach of Fiduciary Duty, Unjust Enrichment, Abuse of Control, Gross
Mismanagement, and Waste of Corporate Assets, alleging that demand on the Puma Board to investigate the misconduct and take legal action against the individuals responsible was futile in the Central District of California (the Duran
Action ). The Duran Action is also pending before Judge Guilford.
Given the unique circumstances of this case, including recent, positive developments at Puma as it gained momentum toward
commercially launching its drug, neratinib, in the United States and abroad, counsel for plaintiffs believed that an early resolution of the derivative claims could be in Puma s best interests. As such,
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
counsel for the plaintiffs in the State Actions and counsel for the van der Gracht de
Rommerswael Action sent separate settlement demands on February 23, 2018, and April 5, 2018, respectively. Over the next few months, counsel engaged in numerous telephonic and written exchanges regarding the terms to be included in any
settlement, with a careful eye toward ensuring the settlement included comprehensive corporate governance reforms tailored to preventing the alleged wrongdoing from recurring by significantly improving the Board s independence and oversight
over the Company s research and development efforts and public disclosures, and significantly improving the overall governance structure of the Company. After continued arm s-length settlement negotiations, on or about June 29, 2018,
the parties agreed upon the corporate governance reforms to be implemented as part of the Settlement. See Exhibit A, attached hereto.
After negotiating the principal terms of the Settlement, on July 25, 2018, the Settling Parties engaged in an all-day, in
person formal mediation before Gregory P. Lindstrom (the Mediator ) to negotiate the remaining terms of the Settlement, including the amount of attorneys fees (inclusive of expenses) that Puma will pay to Plaintiffs Counsel in
connection with the Settlement. Prior to the mediation, the Settling Parties submitted and exchange mediations briefs. While progress was made, the Settling Parties were unable to resolve the matter at that time. Following the mediation, the
Mediator continued to work with the Settling Parties and assisted the Settling Parties in reaching an agreement in principle to settle all derivative claims on July 30, 2018.
Plaintiffs believe that the Actions have substantial merit, and Plaintiffs entry into this Stipulation and Settlement is
not intended to be and shall not be construed as an admission or concession concerning the relative strength or merit of the claims alleged in the Actions. However, Plaintiffs and Plaintiffs Counsel recognize and
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
acknowledge the significant risk, expense, and length of continued proceedings necessary to
prosecute the Actions against the Individual Defendants through trial and through possible appeals. Plaintiffs Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex cases such as the
Actions, as well as the difficulties and delays inherent in such litigation. Plaintiffs Counsel are also mindful of the inherent problems of establishing standing in derivative litigation, and the possible defenses to the claims alleged in the
Plaintiffs Counsel have conducted extensive investigation and analysis, including, inter alia:
(i) reviewing Puma s press releases, public statements, U.S. Securities and Exchange Commission ( SEC ) filings, and securities analysts reports and advisories about the Company, its financial condition, and the status and
results of Puma s research and development efforts relating to its drug, neratinib; (ii) reviewing related media reports about the Company; (iii) researching applicable law with respect to the claims alleged in the Actions and
potential defenses thereto; (iv) researching and preparing correspondence related to plaintiff van der Gracht de Rommerswael s litigation demand; (v) preparing and filing derivative complaints; (vi) reviewing documents produced
to plaintiffs in the State Actions pursuant to the stipulation to stay that was granted by the Superior Court; (vii) conducting damages analyses; (viii) reviewing and analyzing relevant documents in the Securities Action including the
motion to dismiss briefing and the Court s order denying the defendants motion to dismiss and evaluating the merits of, and the defendants potential liability in connection with, the Securities Action; (ix) researching
corporate governance best practices; (x) researching and preparing correspondence related to the settlement demands; (xi) participating in a day-long mediation and several follow-up discussions; and (xii) negotiating this Settlement
with Defendants. Based on Plaintiffs Counsel s thorough review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, Plaintiffs Counsel believe that the Settlement set forth in
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
this Stipulation is fair, reasonable, and adequate, and confers substantial benefits upon
Puma. Based upon Plaintiffs Counsel s evaluation, Plaintiffs have determined that the Settlement is in the best interests of Puma and have agreed to settle the Actions upon the terms and subject to the conditions set forth herein.
Defendants have denied and continue to deny each and all of the claims and contentions alleged by Plaintiffs in the Actions.
The Individual Defendants have expressly denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged in the Actions.
Nonetheless, Defendants have concluded that further litigation of the Actions would be protracted and expensive, and that it is
desirable for the Actions to be fully and finally settled in the matter and upon the terms and conditions set forth in this Stipulation. Defendants have also taken into account the uncertainty and risks inherent in any litigation, especially in
complex cases like the Actions. Defendants have, therefore, determined that it is desirable and beneficial that the actions be settled in the manner and upon the terms and conditions set forth in this Stipulation.
Neither this Stipulation, nor any of its terms or provisions, nor entry of the Judgment, nor any document or exhibit referred
or attached to this Stipulation, nor any action taken to carry out this Stipulation, is, may be construed as, or may be used as evidence of the validity of any of the Released Claims or an admission by or against the Individual Defendants of any
fault, wrongdoing, or concession of liability whatsoever.
Puma, acting through its independent, non-defendant directors, reviewed the allegations and the settlement terms, and in a good
faith exercise of business judgment
STIPULATION OF SETTLEMENT
CASE NO. SACV 18-00236 AG (JCGx)
determined that the Settlement and each of its terms, as set forth in this Stipulation, to
be in the best interests of Puma.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the undersigned counsel for the Settling Parties herein, in
consideration of the benefits flowing to the parties from the Settlement, and subject to the approval of the Court pursuant to Rule 23.1 of the Federal Rules of Civil Procedure, that the claims asserted in the Actions and the Released Claims shall
be finally and fully compromised, settled, and released, and the Actions shall be dismissed with prejudice and with full preclusive effect as to all Settling Parties, upon and subject to the terms and conditions of this Stipulation, as set forth
As used in this Stipulation, the following terms have the meanings specified below:
1.1 Actions means, collectively, the Federal Actions and the State Actions.