193 F. Supp. 3d 5
D. Mass.2016Background
- Plaintiff GBR Group brought a putative class action under §10(b)/Rule 10b-5 and §20(a) against Biogen and three executives, alleging investors were harmed by materially misleading statements about Tecfidera sales after a reported PML death (class period Dec. 2, 2014–July 23, 2015).
- Biogen announced an October 2014 PML death; plaintiffs allege that thereafter Tecfidera sales dropped steeply (new starts down, switches down, discontinuations up) and that Biogen downplayed or concealed that impact in subsequent public statements and guidance.
- Complaint relies heavily on 10 confidential witnesses (mostly regional sales staff and commercial operations personnel) reporting regional sales declines, internal discussions, lowered sales targets, and company monitoring of prescription data.
- Defendants moved to dismiss under Rule 12(b)(6), Rule 9(b), and the PSLRA, arguing (i) the challenged statements were forward-looking/cautionary or non-actionable puffery and (ii) plaintiffs failed to plead scienter with particularity. Plaintiffs conceded the scheme claim in opposition.
- The court found most challenged statements non-actionable (safe-harbor or puffery), but concluded three specific statements about discontinuation rates were plausibly false; however, the complaint failed to plead a strong inference of scienter under the PSLRA, so all claims were dismissed without leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs sufficiently alleged materially false or misleading statements/omissions under §10(b)/Rule 10b-5 | Defendants misrepresented Tecfidera’s commercial trajectory and concealed material negative impacts from the PML death (sales declines, physician hesitancy, increased discontinuations) | Many statements were forward-looking with cautionary language, or vague corporate optimism (puffery), and thus non-actionable | Court: Many statements non-actionable (safe-harbor or puffery), but three specific statements re: discontinuation rates were plausibly misleading; nonetheless insufficient for recovery because of scienter failure |
| Applicability of the PSLRA safe-harbor and adequacy of cautionary language | Safe-harbor does not protect omissions about contemporaneous negative facts; some statements reflected present facts and thus not forward-looking | Guidance and revenue projections are prototypical forward-looking statements accompanied by meaningful cautionary language and SEC risk disclosures | Court: Forward-looking safe-harbor applied to revenue guidance and many "we believe" projections; cautionary language and SEC disclosures were adequate for those statements |
| Whether plaintiffs pleaded scienter (strong inference of intent or high recklessness) with particularity | CW allegations, company importance of Tecfidera, lowered sales goals, internal meetings, and motive (compensation/share repurchase) yield a strong inference of scienter | CW statements are vague, remote from senior management, consistent with public disclosures; lack of insider trading and executives’ own losses undermine motive; competing nonfraudulent inferences (negligence/optimism) more compelling | Court: Allegations, taken together, were plausible but not cogent/compelling; scienter not sufficiently pleaded under PSLRA/Tellabs — dismissal granted |
| Derivative claims: Rule 10b-5(a),(c) scheme and §20(a) control-person liability | Scheme and control claims derive from alleged Rule 10b-5(b) violations and executives’ control over company statements | Scheme claim was conceded; §20(a) depends on a viable primary violation and therefore fails if §10(b) fails | Court: Plaintiffs conceded scheme claim (Count II) — dismissed; §20(a) (Count III) dismissed because underlying Rule 10b-5 claim fails |
Key Cases Cited
- Fire & Police Pension Ass'n of Colo. v. Abiomed, 778 F.3d 228 (1st Cir. 2015) (articulates limits of securities fraud pleading; not all corporate misstatements equal fraud)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (PSLRA scienter standard: inference must be cogent and at least as compelling as any opposing inference)
- ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46 (1st Cir. 2008) (clarifies strong-inference evaluation and comparative weighing of inferences)
- In re Cabletron Sys., Inc., 311 F.3d 11 (1st Cir. 2002) (materiality and particularity standards; examples where CW allegations supported scienter when specific and pervasive)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (materiality standard: information that significantly alters the total mix available to investors)
- Automotive Indus. Pension Trust Fund v. Textron Inc., 682 F.3d 34 (1st Cir. 2012) (puffery/optimism vs. actionable misstatements; comparison of competing inferences).