305 F. Supp. 3d 181
D.D.C.2018Background
- This is a putative securities class action (July 23, 2014–July 23, 2015) against Biogen and three executives alleging that statements about Tecfidera’s safety and sales were materially misleading after a reported PML death and related lymphopenia concerns.
- Plaintiffs rely heavily on 17 confidential witnesses plus two treating physicians (Thrower, Zamvil) to show (a) safety concerns were known internally and (b) Tecfidera sales materially declined.
- Biogen publicly disclosed lymphopenia risk on Tecfidera’s label before the class period, announced the PML death on Oct. 22, 2014, and repeatedly gave guarded revenue guidance and public warnings about moderating growth.
- Plaintiffs identify 31 alleged misstatements/omissions (including 9 newly pleaded statements); the amended complaint narrows to six statements the court deems plausibly false or misleading.
- Defendants moved to dismiss on res judicata and Rule 12(b)(6)/PSLRA grounds; court rejects claim preclusion (earlier putative class was never certified) but grants dismissal for failure to plead scienter sufficiently.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Claim preclusion | Biogen I dismissal should not bar new plaintiffs with new evidence; Biogen II advances a distinct theory about safety and prescribing behavior | Biogen I judgment bars re-litigation because the claims are materially identical | Not precluded: prior putative class was not certified, so absent class members were not bound; res judicata does not apply |
| Actionability/falsity of specific statements | Multiple public statements (earnings calls, press releases) understated the PML death’s impact and misrepresented safety/sales metrics | Many statements were (a) factually accurate at the time, (b) vague corporate optimism (puffery), or (c) forward-looking and covered by PSLRA safe harbor | Majority of new statements non-actionable; court finds six statements (three new, three from Biogen I) plausibly misleading but most challenged statements are puffery/forward-looking or not shown false when made |
| Scienter (required PSLRA “strong inference”) | CWs, physicians, internal meetings, lowered sales goals, and defendants’ motive (Tecfidera core to Biogen) create a strong inference of intent or recklessness | Public disclosures, prior label warnings, cautious guidance, lack of direct contacts between CWs and executives, and plausible nonfraudulent explanations undermine a strong scienter inference | Dismissed: plaintiffs’ circumstantial allegations are plausible but not "cogent and compelling"; scienter not pleaded with the particularity and strength required by PSLRA/Tellabs |
| Section 20(a) control-person liability | Individual executives are liable because they controlled Biogen and participated in or approved misleading statements | Section 20(a) derivative on 10b-5—no underlying securities fraud established | Dismissed: derivative Section 20(a) claim fails because the Rule 10b-5 claim fails |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Sup. Ct.) (establishes comparative evaluation for scienter; strong inference must be at least as compelling as opposing nonfraudulent inferences)
- Fire & Police Pension Ass'n of Colo. v. Abiomed, Inc., 778 F.3d 228 (1st Cir.) (PSLRA scienter standards in First Circuit securities cases)
- ACA Financial Guaranty Corp. v. Advest, Inc., 512 F.3d 46 (1st Cir.) (scienter pleading; comparative weighing of inferences)
- Aldridge v. A.T. Cross Corp., 284 F.3d 72 (1st Cir.) (recklessness standard for scienter)
- Auto. Indus. Pension Trust Fund v. Textron Inc., 682 F.3d 34 (1st Cir.) (puffery and scienter analysis)
- N.J. Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35 (1st Cir.) (use of confidential witnesses and weight given to their allegations)
- Smith v. Bayer Corp., 564 U.S. 299 (Sup. Ct.) (limits on nonparty preclusion and class-action binding effect)
- Taylor v. Sturgell, 553 U.S. 880 (Sup. Ct.) (constrained approach to nonparty preclusion)
- Basic Inc. v. Levinson, 485 U.S. 224 (Sup. Ct.) (materiality standard for securities misstatements)
- In re Cabletron Sys., Inc., 311 F.3d 11 (1st Cir.) (use and limits of confidential-witness allegations and core-operations theory)