On June 18, 2017, the Company entered into a stipulation and
agreement of settlement that is intended to settle the previously disclosed consolidated purported class action litigation captioned
Medina v. Clovis Oncology, Inc.,
et. al., No.
1:15-cv-02546
(the Class Action) against the Company and certain of its officers and underwriters pending in the United States District Court for the
District of Colorado (the Court). As previously disclosed, the Class Action, which was filed on behalf of a putative class of purchasers of the Companys securities (the Class), alleges that the Company and certain
of its officers and underwriters violated federal securities laws by making allegedly false and misleading statements regarding the progress toward FDA approval and the potential for market success of rociletinib. The Class Action is more fully
described in the Companys Quarterly Report on Form
10-Q
for the period ended March 31, 2017.
Under the terms of the proposed settlement, the Class will receive total consideration of approximately $142.0 million, comprised of
$25.0 million in cash and the issuance by the Company of a to be determined number of shares of its common stock (the Settlement Shares) equal to $117.0 million divided by the volume weighted average price of the Companys
common stock over the 10 trading days immediately preceding the date of the hearing set by the Court to consider the final approval of the settlement. The cash portion of the consideration is expected to be funded by the Companys insurance
carriers. Following such payment, the Company will not receive any further significant contributions from its insurance carriers for the reimbursement of legal expenses expended on the finalization of the Class Action settlement or any amounts
(including damages, settlement costs or legal fees) related to the other pending litigations and inquiries relating to the Companys regulatory update announcement in November 2015 that the FDA requested additional clinical data on the efficacy
and safety of rociletinib (other than certain damages or settlement costs related to the pending derivative actions described below).
In
connection with the proposed settlement, the Company expects to record a charge to earnings and a liability in the second quarter of 2017 in the amount of approximately $142.0 million and a receivable of approximately $25.0 million from
the insurance carriers. The Company will issue the Settlement Shares no later than 5 business days after the date the judgment is entered by the Court approving the settlement.
The proposed settlement contains no admission of wrongdoing. The Company has always maintained and continues to believe that it did not engage
in any wrongdoing or otherwise commit any violation of federal or state securities laws or other laws.
Upon the effectiveness of the
proposed settlement, the Company and its directors and officers as well as the other defendants named in the Class Action will be released from the claims that were asserted or could have been asserted in the Class Action by Class members
participating in the settlement. The proposed settlement is subject to the confirmatory diligence by lead counsel for the Class, the completion of final documentation, preliminary and final Court approval, funding of the $25.0 million in cash
by the Companys insurance carriers, the issuance of the Settlement Shares and other customary closing conditions. Further, the Company has the right to terminate the settlement if Class members timely and validly requesting exclusion from
the Class meet the conditions set forth in a confidential supplemental agreement with the lead plaintiff. There can be no assurance that the settlement will be finalized and approved and, even if approved, whether the conditions to closing will
be satisfied, and the actual outcome of this matter may differ materially from the terms of the settlement described herein.
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All other litigation described in the Companys Quarterly Report on Form
10-Q
for the period ended March 31, 2017, including, without limitation, the Electrical Workers, Antipodean, Macalinao, McKenry, and Guo complaints, remains pending and the Company continues to vigorously
defend against the allegations in those actions, but there can be no assurance that the defenses will be successful. In addition, on May 10, 2017, John Solak, a purported shareholder of the Company, filed a derivative complaint in the Delaware
Court of Chancery, alleging that the defendants breached their fiduciary duties by adopting a compensation plan that overcompensates the
non-employee
directors of the Company. The Company intends to
vigorously defend against the allegations in the Solak complaint, but there can be no assurance that the defense will be successful.
In
addition, the Company has received inquiries and requests for information from governmental agencies, including the U.S. Securities and Exchange Commission and the U.S. Department of Justice, relating to the Companys regulatory update
announcement in November 2015 that the FDA requested additional clinical data on the efficacy and safety of rociletinib. The Company is continuing to cooperate with these agencies with respect to their investigations. The proposed
settlement does not resolve these inquiries and the Company cannot predict their timing or outcome.
The information in this report
relating to the prospective resolution of the putative class action consolidated complaint are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements involve substantial risks and uncertainties, including, among others, risks and uncertainties associated with obtaining court approval of the proposed settlement, the number of plaintiffs
who may
opt-out
of the proposed settlement, whether any proposed settlement is appealed, and the outcome of the ongoing inquiries from the U.S. Securities and Exchange Commission and the U.S. Department of
Justice. The Company undertakes no obligation to update or revise any forward-looking statements. For a further description of the risks and uncertainties relating to the business of the Company in general, see the Companys filings with the
Securities and Exchange Commission, including the Companys Annual Report on Form
10-K
and Quarterly Reports on Form
10-Q.
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