106 F. Supp. 3d 439
S.D.N.Y.2015Background
- DMD is a rare, fatal neuromuscular disease; Prosensa developed drisapersen for DMD under a GSK partnership with control over development and commercialization by GSK.
- 6.9 million Prosensa shares sold at $13 each in the June 2013 IPO, after a Registration Statement was filed May 24, 2013 and amended through June 27, 2013.
- DEMAND-II (Phase II) enrolled 53 patients and showed a 6MWD benefit at 24 weeks; DEMAND-III (Phase III) enrolled 186 boys, with a primary endpoint at 48 weeks.
- Registration Statement described both studies, their designs, enrollment criteria, and sites, and noted GSK’s pivotal role and results expectations.
- On Sept. 20, 2013, DEMAND-III failed to meet its primary endpoint; stock price dropped; partnership with GSK ended in Jan. 2014; Prosensa later entered a bid for acquisition in Nov. 2014.
- Plaintiffs filed suit July 2014 alleging omissions about DEMAND-III enrollment changes, site expansion, and potential study flaws in violation of Sections 11 and 15 of the Securities Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether omissions in the Registration Statement support a Section 11 claim | Plaintiffs allege omissions about DEMAND-III flaws and impact on results. | Defendants argue disclosed study designs; no required inference-level disclosure. | No actionable omissions; disclosures adequate; no plausible Section 11 claim. |
| Whether DEMAND-III’s differences and potential flaws needed disclosure | Differences would undermine comparability and drug prospects. | Disclosures allowed investors to assess studies; no duty to forecast failure. | Not actionable; not required to forecast outcomes. |
| Whether the statements about drisapersen’s status and prospects lacked a reasonable basis | Positive statements about development status were unsupported. | No identifiable false positive statements; risk disclosures bespeak caution. | No unwarranted positive statements; claim dismissed. |
| Whether Section 15 control-liability claims survive without a primary violation | If primary violation, control claims stand. | No primary violation; Section 15 fails. | Dismissed due to absence of primary violation. |
Key Cases Cited
- In re TVIX Sec. Litig., 25 F.Supp.3d 444 (S.D.N.Y. 2014) (no §11 claim where hindsight criticism of design)
- In re Progress Energy, Inc., 371 F.Supp.2d 548 (S.D.N.Y. 2005) (no omission where disclosed facts allow investor assessment)
- In re Flag Telecom Holdings, Ltd. Sec. Litig., 618 F.Supp.2d 311 (S.D.N.Y. 2009) (cautionary language and disclosures sufficient to avoid liability)
- In re Alstom SA, 406 F.Supp.2d 433 (S.D.N.Y. 2005) (no duty to include negative inferences; disclosed data adequate)
- ProShares Trust Sec. Litig., 889 F.Supp.2d 644 (S.D.N.Y. 2012) (no §11 claim where forecasted outcomes could not be known in advance)