United States District Court, D. Massachusetts
MARK A. CORBAN, individually and on behalf of all others similarly situated, Plaintiffs,
SAREPTA THERAPEUTICS, INC.; CHRIS GARABEDIAN; SANDY MAHATME; and ED KAYE, Defendants.
MEMORANDUM & ORDER
INDIRA TALWANI, District Judge.
This putative federal securities class action lawsuit challenges statements and omissions concerning a biopharmaceutical company's drug candidate for the treatment of a rare disease. Plaintiffs allege that Sarepta Therapeutics, Inc. ("Sarepta") and Individual Defendants Chris Garabedian, Sandy Mahatme, and Ed Kaye violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, and that the Individual Defendants also violated section 20(a) of the Exchange Act. Presently before the court is Defendants' Motion to Dismiss Plaintiffs' Amended Complaint [#42]. Because the court finds that Plaintiffs have not adequately alleged any actionable misstatements or omissions, Defendants' motion to dismiss is allowed.
The putative class members purchased the securities of Sarepta during the period of July 10, 2013 through November 11, 2013 (the "Class Period"). Consolidated Class Action Compl. ¶ 1 [#39] ("Compl."). During the Class Period, Sarepta was focused on advancing eteplirsen- its leading drug candidate for the treatment of Duchenne muscular dystrophy ("DMD")- through the Food and Drug Administration's ("FDA") approval process. Id . ¶¶ 14, 21. DMD, a rare genetic disease caused by a mutation in the dystrophin gene, results in the absence of dystrophin-a protein necessary for muscle function. Id . ¶ 14. Currently, no approved disease-modifying therapies exist for DMD. Id . ¶ 16.
As the Complaint explains, the first step toward accelerated approval of a drug is the FDA's acceptance for consideration of a New Drug Application ("NDA"). Id . ¶¶ 36-37. The FDA's decision to accept an NDA is not based on the merits of the product, but is a threshold determination of whether there exists sufficient data to examine the product and permit substantive review. Id.
A. Eteplirsen's Clinical Trials
Eteplirsen allows the cells of certain DMD patients to produce truncated but functional dystrophin. Id . ¶ 47. To test its safety and efficacy, Sarepta evaluated eteplirsen in a randomized, double-blind study (Study 201). In Study 201, Sarepta enrolled twelve boys aged seven to thirteen years who had a genotype amenable to treatment. Id . ¶ 48. These patients were randomized to one of three treatments weekly-placebo, eteplirsen 30 mg/kg, and eteplirsen 50 mg/kg. Id . After 24 weeks, all patients receiving the placebo were then given eteplirsen at 30 mg/kg or 50 mg/kg. Id . After 28 weeks, all patients were rolled over into a long-term study (Study 202), which continued to follow the product's efficacy and safety. Id . These studies were conducted as part of Sarepta's Phase IIb clinical trials. Id . ¶ 18.
The success or failure of a clinical trial can be measured by whether the trial meets a pre-specified endpoint or outcome and by the statistical significance of its results. Id . ¶ 27. For eteplirsen, the pre-specified endpoint concerned the change in the percent of dystrophin-positive fibers present in muscle biopsies. Id . ¶ 49. By restoring semi-functional dystrophin production in DMD patients, Sarepta hypothesized that eteplirsen could restore or prevent further deterioration of muscle weakness. Id . To evaluate the product's effectiveness, Sarepta collected muscle biopsies from all patients before treatment, at Week 12 from the four patients in the 50 mg/kg cohort and two placebo-treated patients, at Week 24 from the four patients in the 30 mg/kg cohort and two placebo-treated patients, and again from all patients at Week 48. According to these trials, eteplirsen treatment of 12 weeks or longer resulted in increased dystrophin production in all patients. Id.
An important secondary endpoint tied to the product's clinical efficacy, however, was the six-minute walk test (6MWT). Id . ¶ 50. This test measures how far a patient can walk in six minutes. Id . In Sarepta's Phase IIb clinical trials, there was no statistically significant difference in how far patients who received 30 mg/kg of eteplirsen could walk in six minutes as compared to patients on placebo. Id . Similarly, there was no statistically significant difference when combining the results from the patients on 30 mg/kg and 50 mg/kg of eteplirsen and comparing those results to those of placebo patients. Id . Plaintiffs allege that to avoid these adverse results, Sarepta excluded data from two patients in the 30 mg/kg cohort who had lost walking ability during the trials. Id.
B. Plaintiffs' Investigation
Conducting its own investigation into Sarepta's Phase IIb clinical trials, Plaintiffs provide an opinion from its own expert as well as information from three former Sarepta employees. First, Plaintiffs provide the opinion of Richard A. Guarino, a medical doctor who has worked in the pharmaceutical industry for over forty years and is purported to be an expert on the FDA's standards and regulations for drug approval. Id . ¶ 52. Dr. Guarino, after reviewing the available data regarding the eteplirsen trials, concludes that the trials suffered from significant problems such that FDA approval of an NDA was highly unlikely. Id . ¶ 53. This conclusion is based on the following: (1) that the patient population established by Sarepta was too small to lay the groundwork for a Phase III trial program, never mind approval based only on a Phase II study, and (2) that Sarepta deviated from the intent-to-treat guidelines by excluding two patients who lost ambulation, which biased the efficacy and safety results of the trial, and whose inclusion resulted in no meaningfully statistical significant differences versus placebo. Id.
As concerns the latter point, the Complaint details the FDA's policy regarding the collection, maintenance, and inclusion of clinical study data, including information on subjects who withdraw from clinical studies. Id . ¶ 43. As explained by the FDA in its Guidance for Sponsors, Clinical Investigators, and IRBs: Data Retention When Subjects Withdraw from FDA-Regulated Clinical Trials, "FDA law and regulations recognize that a complete and accurate risk/benefit profile of an investigational product depends upon the data from every subject's experience in the clinical trial." Id . ¶ 45. Removal of already collected data- including data from subjects who have withdrawn from the study-would undermine the scientific and ethical integrity of the research. Id . ¶ 46. For these reasons, the FDA has long advised against so called "informative censoring, " recommending instead an "intent-to-treat" approach in which the tester analyzes data related to all subjects that the investigator intended to treat while utilizing different approaches for the interpretation and imputation of missing data. Id . ¶ 45.
In addition, Plaintiffs allege facts provided by three former Sarepta employees. Confidential Witness 1 ("CW 1"), who previously served as Senior Clinical Director at Sarepta, recalls from company meetings that Defendant Chris Garabedian-President, CEO, and a director of Sarepta during the relevant time period-chose the efficacy endpoints for eteplirsen and tended to push his own plans through without generating consensus within the company. Id . ¶ 56. CW 1 also explained how Sarepta proceeded without first obtaining a Special Protocol Assessment, a tool by which the sponsor of a clinical trial and the FDA meet to discuss the sponsor's proposed protocols and reduce any agreements to writing that becomes part of the administrative record. Id . ¶ 25. Through this mechanism, the sponsor can incorporate any recommendations from the FDA into their trials. Id . ¶ 57. According to CW 1, Sarepta took on tremendous risk in foregoing a Special Protocol Assessment, as the FDA had never before approved a drug in eteplirsen's class. Id . This, combined with the trial's small study group, hampered the likelihood of FDA approval of eteplirsen. Id.
Confidential Witness 2 ("CW 2") and Confidential Witness 3 ("CW 3") added similar information concerning Defendant Garabedian's "hands-on" approach. According to CW 2, Sarepta's former Associate Director of Business Development, Garabedian was informed on every facet of the company, including the progress of eteplirsen, as he "micro-managed" and "weighed in on everything, down to the type of letterhead on the stationary." Id . ¶ 60. CW 3 also describes Garabedian as very "hands on" in designing and interpreting the clinical trials and data for eteplirsen. Id . ¶ 64. Additionally, CW 2 relates how none of the companies approached by Sarepta to form a joint-venture decided to pursue such an arrangement because of those companies' various concerns over eteplirsen and Sarepta's ability to obtain FDA approval. Id . ¶ 61.
C. False and Misleading Statements Alleged in the Complaint
As discussed further below, Plaintiffs allege misstatements and omissions from ten separate disclosures made by Defendants during the Class Period concerning etiplirsen's test results and data set, Defendants' discussions with the FDA in July 2013, and the adverse implications of a failed Phase ...