Case Information
*1 United States District Court District of Massachusetts )
Caryl Hull Leavitt, individually )
and on behalf of all others )
similarly situated )
)
Plaintiff, ) Civil Action No.
) 18-12433-NMG v. )
)
Alnylam Pharmaceuticals, Inc. et )
al, )
Defendants. MEMORANDUM & ORDER
GORTON, J.
This рutative securities fraud class action is brought by lead plaintiff Tunc Toker (“Toker”) on behalf of himself and other similarly situated investors against Alnylam Pharmaceuticals, Inc., its Chief Executive Officer, its Chief Financial Officer and other executives (collectively “Alnylam” or “defendants”). Toker alleges that defendants made false and/or misleading statements regarding the efficacy and marketability of its therapeutic injection for the treatment of hereditary ATTR amyloidosis during the class period.
Toker brings this purported class action asserting claims against Alnylam and certain Alnylam executives pursuant to Sections 10(b) and 20(a) of thе Securities Exchange Act of 1934 *2 (“the Exchange Act”). Pending before this Court is the defendants’ motion to dismiss. For the following reasons that motion will be allowed.
I. Facts
Alnylam is a biopharmaceutical company incorporated in Delaware with its principal place of business in Cambridge, Massachusetts. The company develops and commercializes treatments for hereditary transthyretin-mediated amyloidosis (“hATTR amyloidosis” or “hATTR”), a gene mutation that causes a potentially harmful build-up of certain proteins in the body’s nerves and organs. hATTR amyloidosis manifests in two ways: damage affecting the nerves (polyneuropathy) and damage impacting the heart (cardiomyopathy). Patients often exhibit both manifestations. Alnylam develops its therapeutics based on RNA interference (“RNAi”) which inhibits the formation of those disease-causing proteins.
In December, 2017, based on study data from their clinical trial, Phase 3 APOLLO (“APOLLO”), Alnylam submitted to the Food and Drug Administration (“the FDA”) a new drug application and marketing authorization application for patisiran (trade name Onpattro) (“Onpattro” or “patisiran”) for the treatment of both the polyneuropathy and cardiomyopathy manifestations of hATTR.
APOLLO was designed primarily to evaluate the efficacy and safеty of Onpattro for hATTR amyloidosis patients with *3 polyneuropathy. Accordingly, the study’s primary endpoint was to determine the efficacy of patisiran for such patients. APOLLO’s secondary endpoints sought to measure the efficacy of patisiran on various other metrics, including cardiac health. In addition to primary and secondary endpoints, the study included several exploratory endpoints, also including cardiac assessments.
Because hATTR causes both polyneuropathy and cardiomyopathy, often in the same patients, the trial included patients with the cardiac manifestation of the disease known as the cardiac sub-population. Within that sub-population, APOLLO contained metrics to evaluate patisiran’s efficacy for cardiomyopathy.
In September, 2017, Alnylam received data from APOLLO and, while discussing the study on a conference call with investors, announced that APOLLO met its primary and secondary efficacy endpoints. Following that announcement, Alnylam’s stock (which trades on the NASDAQ Stock Exchange) rose from $75.04 to $113.84 per share, a 51% increase. The Amended Complaint alleges that, simultaneously, Alnylam claimed that APOLLO supported an FDA approval for cardiomyopathy. Shortly thereafter, an investigatоr in the study presented the full dataset at an hATTR meeting in Paris. In November and December, 2017, Alnylam submitted a New Drug Application (“NDA”) to the FDA, using the *4 results from APOLLO, and seeking approval of the drug for all manifestations of hATTR.
In August, 2018, the FDA approved patisiran for the treatment of polyneuropathy caused by hATTR amyloidosis but did not approve the drug for treatment of cardiomyopathy. Further, the FDA approval did not include any labeling with respect to cardiomyopathy. In contravention of the FDA, however, the European Medicines Agency (“the EMA”) approved Onpattro for all manifestations of hATTR (in patients with polyneuropathy) and included cardiac data on the drug label.
After the FDA’s announcement that patisiran would not be approved for cardiomyopathy, Alnylam’s stock price fell by almost 6% from $97.38 to $90.95. The price subsequently rebounded, however, and by September 11, 2018, had risen to $100.35 per share.
On September 12, 2018, the FDA released a report discussing its review of paisiran and the approval process (“the FDA report”). That day several securities analysts reported that the FDA report revealed a greater risk with respect to certain trials of Onpattro and a more limited market opportunity for the drug than previously thought. The аnalysts’ reports suggested that the FDA was concerned by cardiac deaths in patients treated with Onpattro and that Alnylam did not provide sufficient cardiac efficacy data to support approval. After the FDA report *5 was published, Alnylam’s price per share fell by over 5% from $100.35 to $94.75.
The Amended Complaint alleges that between February 15, 2018, and September 12, 2018 (“the Class Period”), defendants made materially misleading statements about the cardiac efficacy and safety of patisiran and APOLLO’s results in violation of Section 10(b), SEC Rule 10b-5 and Section 20(a) of the Exchange Act. It alleges that, as a result of that decline in market value, investors who purchased Alnylam stock during the Class Period in reliance on defendants’ false and/or misleading statements suffered significant losses.
II. Procedural History
In September, 2018, Carol Leavitt filed her Complaint in the United States District Court for the Southern District of New York. Shortly thereafter, notice of this putative securities fraud class action was published pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) on GlobeNewswire, a global business-oriented press release distribution service with substantial operations in North America. 15 U.S.C. § 78u-4(a)(3)(A)(i).
In late November, 2018, the case was transferred to this Court. A few days later, putative class members Toker, Lеavitt, Edwards and Iappini filed their respective motions to be appointed lead plaintiff pursuant to the PSLRA. Id. In May, *6 2019, this Court allowed the motion of Tunc Toker for appointment as lead plaintiff and approval of counsel. In July, 2019, plaintiff filed an Amended Complaint.
III. Motion to Dismiss
A. Legal Standard
To survive a motion to dismiss for failure to state a claim
under Fed. R. Civ. P. 12(b)(6), a complaint must contain
“sufficient factual matter” to state a claim for relief that is
actionable as a matter of law and “plausible on its face.”
Ashcroft v. Iqbal,
When rendering that determination, a court may not look
beyond the facts alleged in the complaint, documents
incorporated by reference therein and facts susceptible to
*7
judicial notice. Haley v. City of Boston,
B. Securities Fraud in Violation of the Exchange Act
1. Legal Standard
Section 10(b) of the Exchange Act makes it unlawful “[t]o use or employ, in connection with the purchase or sale of any security...any manipulative device or contrivance.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 similarly makes it unlawful
[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading...
17 C.F.R. § 240.10b-5(b).
To state a claim under Section 10(b) and Rule 10b-5, a plaintiff must adequately plead six elements:
1) a material misrepresentation or omission; 2) scienter, or a wrongful state of mind; 3) a connection with the purchase or sale of a security; 4) reliance; 5) economic loss; and 6) loss causation.
Matrixx Initiatives, Inc. v. Siracusano,
A claim for securities fraud must also comply with Fed. R. Civ. P. 9(b) and satisfy the exacting requirements of the PSLRA. *8 Rule 9(b) requires a party to state “with particularity the circumstances constituting fraud” including the time, place, and content of the alleged false or fraudulent representations. Fed. R. Civ. P. 9(b).
The PSLRA imposes two heightened pleading requirements on
federal securities fraud claims beyond those enumerated in the
Federal Rules of Civil Procedure. Tellabs, Inc. v. Makor Issues
& Rights, Ltd.,
specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.
15 U.S.C. § 78u-4(b)(1). Second, to plead scienter adequately,
plaintiffs must state “with particularity facts giving rise to a
strong inference” that the defendant acted recklessly or with
the intent to deceive, manipulate, or defraud. 15 U.S.C. § 78u-
4(b)(2); Greebel v. FTP Software, Inc.,
Ruling on a motion to dismiss a securities fraud claim
therefore requires a district court to assess the strength of
competing inferences. When there are equally strong inferences
for and against scienter, “the draw is awarded to the
plaintiff.” City of Dearborn Heights Act 345 Police & Fire Ret.
*9
Sys. v. Waters Corp.,
In addition to heightened pleading requirements, the PSLRA
contains safe-harbor provisions for forward-looking statements.
See 15 U.S.C. § 78u-5. As defined by the statute, forward-
looking statements are those “that speak predictively of the
future.” In re Stone & Webster, Inc., Sec. Litig.,
C. The Parties’ Arguments
At the crux of plaintiffs’ complaint is the contention that APOLLO 1) was never designed to test the efficacy of patisiran for cardiomyopathy and 2) provided no cardiac efficacy data to the FDA. Plaintiffs maintain that FDA approval of patisiran for cardiomyopathy was, therefore, impossible and defendants’ public statements which forecast approval were intentionally false and misleading. Plaintiffs submit that because an Alnylam clinical trial for a different hATTR drug, Revuisran, failed, the *10 defendants were motivated to inflate patisiran’s potential fraudulently.
The Amended Complaint (which prolongs to 110 pages) identifies 38 public statements made by defendants which plaintiffs contend were intentionally false or misleading (“the challenged statements”). Because the challenged statements are numerous and verbose the Court will refer to them cumulatively or by general groupings. Broadly, the challenged statements fall into categories regarding 1) the prospects of FDA aрproval for all manifestations of hATTR amyloidosis and the resulting scope of the drug label and 2) results and data from the APOLLO clinical trial. Plaintiffs aver that the challenged statements were false statements of fact, not opinions, were not subject to any PSLRA safe harbor provision and were made with the requisite scienter.
Defendants counter that the complaint fails to state a claim on multiple, independent and dispositive grounds. They assert that plaintiff has not pled any particularized facts which demonstrate that Alnylam made actionable false or misleading statements/omissions because all material infоrmation was disclosed to investors. Defendants further rejoin that 1) Alnylam’s projections were forward-looking statements accompanied by meaningful cautionary language and thus were protected by the PSLRA’s safe harbor, 2) their statements *11 interpreting clinical trial results were non-actionable opinions and 3) plaintiff’s allegations do not give rise to the strong inference of scienter necessary to state a claim for securities fraud under the PSLRA.
D. The Design of the APOLLO Study
Plaintiffs’ contention that APOLLO was never intended to evaluate efficacy for cardiomyopathy is contradicted by the study design and its corresponding statistical analysis рlan. As set out by the clinical study protocol, APOLLO was intended primarily to evaluate the efficacy and safety of patisiran in patients with hATTR amyloidosis with polyneuropathy. Its primary endpoint matched that goal. APOLLO did, however, contain a number of measures designed to test for cardiac efficacy and included secondary endpoints designed to test the efficacy of patisiran on measures of cardiac function on the cardiac sub-population. APOLLO also included several exploratory endpoints which incorporated cardiac assessments. Although exploratory endpoints are nоt the focal point of a clinical trial and are less likely to show an effect, they are nevertheless included to investigate novel hypotheses and can lead to data inclusion on drug labels.
The study design as disclosed in the clinical study
protocol, therefore, refutes plaintiff’s principal contention
that FDA approval was impossible and that any statements that
*12
defendants made with respect to cardiomyopathy were therefore
misleading. See In re The First Marblehead Corp. Sec. Litig.,
Moreover, in 2019, the EMA approved patisiran and included
APOLLO cardiac efficacy data in the label. The EMA’s approval
and inclusion of data on the label contradicts the plaintiffs’
claims that FDA approval or a broad label was impossible. See
In re Sanofi Sec. Litig.,
The exploratory endpoints and the measures for cardiac
efficacy were disclosed in the clinical study protocol. The EMA
included cardiac efficacy data on the drug’s label. That the
FDA ultimately did not approve patisiran for cardiomyopathy does
not demonstrate that such approval was out of the question or
that the study was never designed to evaluate cardiomyopathy.
In light of those facts, allegations that defendants made
materially misleading statements with respect to FDA approval
are unavailing. See Ganem v. InVivo Therapeutics Holdings
Corporation,
E. Results of APOLLO
Plaintiffs further maintain that because Alnylam failed to submit cardiac efficiency data to the FDA, approval was unachievable. That contention is, however, contradicted by the FDA Report and the actions of the EMA. Alnylam provided the FDA with data intended to demonstrate cardiac effectiveness and told investors that it believed that data was significant and could support a broad label. After reviewing the data, the FDA apparently disagreed, but just because it came to a different conclusion does not mean there is merit in plaintiffs’ claims that no data was presented or that the challenged statements constituted securities fraud. Notably, the EMA included cardiac data on the drug label it approved signifying that Alnylam must have collected and submitted at least some relevant data.
Moreover, the challenged statements which discussed APOLLO
results and cardiac data were non-actionable opinions. Although
the FDA interpreted trial results differently and defendants’
opinions may have been erroneous, those facts alone do not
render the statements fraudulent or misleading. Without
specific allegations of falsity, opinions interрreting the
results of a clinical study are not actionable. See Harrington
*14
v. Tetraphase Pharm. Inc., No. CV 16-10133-LTS,
That Alnylam presented its data in a positive light and
made optimistic statements before FDA review, withоut more, does
not make those statements materially misleading. See Corban v.
Sarepta Therapeutics, Inc., No. 14-CV-10201-IT,
F. Cardiac Safety Data
Plaintiffs further contend that the defendants knowingly misrepresented the safety of patisiran because the true safety profile portended the agency’s non-approval of the drug. Although Alnylam disclosed the frequency of death in the patisiran and placebo branches of the study, plaintiffs claim that Alnylam did not disclose that cardiac-related deaths in patisiran-treated patients occurred at a higher frequency (7 times) than in placebo patients (once) (a 3.5 to 1 drug to placеbo death ratio after accounting for the fact that there *15 were twice as many patisiran patients as placebo patients in APOLLO). Plaintiffs note that a 4:1 ratio was enough to scuttle an earlier trial for Revusiran, an alternative hATTR drug intended to treat cardiomyopathy. Further, plaintiffs claim that the FDA disagreed when Alnylam reclassified certain deaths from cardiac to non-cardiac related. Plaintiffs submit that defendants knowingly made statements claiming patisiran was safe despite data which showed serious safety concerns.
Defendants rejoin that the FDA report, published after review of APOLLO data, refutes thоse claims on several grounds. Alnylam explains that the FDA concluded that those cardiac related deaths were 1) not caused by patisiran, 2) constitute too small a sample from which to draw a conclusion, 3) included patients with gene mutations associated with higher mortality. Overall, the FDA purportedly concluded that patisiran was safe.
As Alnylam points out, the FDA review of Onpattro supports their contentions. The FDA concluded that although concerning, the small numbers of deaths did not merit description in labeling. It also noted that the “small numbers of cardiac deaths...make this finding difficult to interpret.” The FDA’s risk assessment concluded that the deaths in patients given patisiran included those with gene mutations associated with a higher mortality. According to the report, there was no *16 imbalance between the patisiran and placebo groups and deaths were considered unrelated to study treatment.
In light of the FDA’s safety evaluation and findings, particularly the data analysis limitations inherent in a small sample size, defendants’ challenged statements regarding safety were not material misrepresentations or misrepresentation by omission.
G. PSLRA Safe Harbor
1. Forward-Looking Statements Regarding the Prospects of FDA Approval
In addition to their contention that their statements were not materially misleading, defendants identify 15 of the 38 challenged statements (all relating to FDA approval) that they claim are protected by the PSLRA’s safe harbor provision.
To be protected by the PSLRA, those forward-looking
statements must have been accompanied by meaningful cautionary
language that was “substantive and tailored to the specific
future projections, estimates or opinions ... which plaintiffs
challenge.” Isham v. Perini Corp.,
The challenged statements, made on conference and earnings
calls, which discussed potential FDA approval, are typical
forward-looking statements. They anticipated a hoрed-for future
event, FDA approval, and fit squarely within the PLSRA’s safe
harbor. See In re Sanofi Sec. Litig.,
Those challenged statements were accompanied by adequate meaningful cautionary language. At the outset of each conference call, a statement was read which included a paragraph addressing forward-looking statements and referred investors to Alnylam’s quarterly report on file with the SEC. Alnylam’s quarterly report (“10-Q”) detailed over 25 pages of risk fаctors and included sections on risks related to development, clinical *18 testing and regulatory approval of product candidates and detailed statements about APOLLO and patisiran.
Furthermore, many of the conference calls were accompanied by slides which noted a variety of risk factors similar to those included in the SEC filings. Among other risks, the slides identified action by regulators, clinical results and efficacy and safety of product candidates as factors that could cause results to differ from Alnylam’s forward-looking statements. In addition to formalistic warning statements and slides, the challenged statements themselves were generally accompanied by a specific, if more abbreviated, summation of the principal risk inherent in developing novel pharmaceutical drugs, i.e., that FDA approval was not guaranteed. For instance, in a November, 2017, conference call defendant Dr. Vaishnaw cautioned investors with respect to the scope of the potential label that “the regulators need to weigh in” and “ultimately, of course, they [the FDA] have to adjudicate on that.”
Statements made at healthcare conferences contained similar warnings with regard to the risk that the FDA might not approve Onpatro. For instance, in January, 2018, Dr. Maraganore stated that:
we’ve asked for hATTR amyloidosis as the indication statement for patisiran and we think the data supports that. And we are very happy to have a dialogue and we’ll have a dialogue with the FDA around that label. I think *19 that if you look at the spectrum, that’s a win, that’s our ask that we think is supported by the data. The other extreme might be limited to polyneuropathy patients okay? That statement is largely representative. The risk that patisiran was subject to FDA approval and could be limited was properly described by defendants in meaningful and specific tеrms sufficient to trigger the safe harbor. See Isham 665 F. Supp. 2d at 39-40.
During each of the conference calls, by virtue of opening
statements, reference to SEC filings, presentation text and in
the challenged statements themselves, Alnylam warned investors
about specific risks including deficient clinical trial results
and the prospect of the FDA declining to approve the drug.
Such warnings are not mere boilerplate and were sufficient to
invoke the safe harbor and as such are non-actionable. See
Harrington
H. Scienter Although the Court has concluded that plaintiffs have failed to state an actionable claim, for the sakе of completeness, it briefly turns to the allegations of scienter. The Court finds that the plaintiffs have not properly alleged scienter under the heightened pleading standard required by the PLSRA.
*20
Scienter is “‘a mental state embracing intent to deceive,
manipulate, or defraud.’” ACA Fin. Guar. Corp.
,
512 F.3d at
58 (quoting Ernst & Ernst v. Hochfelder
,
often contains clear allegations of admissions, internal
records or witnessed discussions suggesting that at the
time they made the statements claimed to be misleading, the
defendant officers were aware that they were withholding
vital information or at least were warned by others that
this was so.
In re Boston Sci. Corp. Sec. Litig.,
1. Insider Trading
Plaintiffs allege that suspiciously-timed, insider trading by the individual defendants leads to the strong inference that they sоught to defraud investors for personal gain. Defendants rejoin that 1) their stock sales were not unusual or suspicious; 2) all challenged stock sales were executed pursuant to Rule 10b5-1 trading plans and 3) the temporal delay between the stock sales and the market-moving announcement defeats an inference of scienter.
Although insider trading on its own cannot establish
scienter, trading in “suspicious amounts or at suspicious times
may be probative of scienter.” Mississippi Pub. Employees' Ret.
Sys. v. Bos. Sci. Corp.,
During the Class Period, four of the five individual defendants sold their Alnylam stock in the aggregate amount of $66 million. Plaintiffs argue that such sales were executed before negative news about APOLLO reached the market when share prices were high.
Sole reliance on proceeds from insider trading is
insufficient to establish a strong inference of scienter.
Plaintiffs do not provide thе necessary evidence or context
surrounding the trades that would allow the Court to draw the
strong inference required. For instance, the complaint makes no
mention of the percentage of the holdings of each defendant that
were sold during the Class Period. See Fire & Police Pension
Ass'n of Colorado v. Abiomed, Inc.,
Considered in context, defendants trades do not appear
particularly suspicious. Defendant Mr. Soni did not trade at
all, a fact that, while not dispositive, undercuts the inference
of scienter for the other named defendants. See Acito v. IMCERA
Grp., Inc.,
Although defendants Mr. Green and Dr. Vaishnaw sold a
higher percentage of their shares during the Class Period than
in prior years, their trading does not rise to the level of
unusual or suspicious. During the Class Period Green sold about
22% of his holdings, an increase of 16% from the previous year.
Vaishnaw sold 47% of his holdings during the Class Period but in
the year prior to the Class Period, he sold 33%. Again, those
increases do not go “well beyond” normal patterns of trading.
Greebel,
Furthermore, that all trading was pre-scheduled pursuant to
Rule 10b-5 trading plans negates an inference of scienter. See
Emerson v. Genocea Biosciences, Inc.,
Overall, plaintiffs have failed to establish a strong
inference of scienter. They have presented no dirеct evidence
of scienter and “their circumstantial case is not compelling”
Simon v. Abiomed, Inc.,
I. Section 20(a)
Violations of Section 20(a) of the Exchange Act require an
underlying violation of the Exchange Act. See ACA Fin. Guar.
Corp.
,
IV. Dismissal without prejudice
The PSLRA does not “require that all dismissals be with
prejudice,” ACA Fin. Guar. Corp.,
ORDER
In accordance with the foregoing, the defendants' motion to dismiss (Docket No. 59) is ALLOWED and the Amended Complaint is dismissed without prejudice.
So ordered. /s/ Nathaniel M. Gorton
Nathaniel M. Gorton United States District Judge Dated March 23, 2020