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In re Biogen Inc. Securities Litigation

United States District Court, D. Massachusetts

June 23, 2016



          F. Dennis Saylor, IV United States District Judge

         This is a putative class action involving alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and SEC Rule 10b-5. Lead plaintiff GBR Group, Ltd. has brought suit, on behalf of a class of similarly situated persons, against biopharmaceutical company Biogen Inc. and three Biogen executives. Plaintiffs contend that class members were harmed when they purchased Biogen’s common stock at prices that were artificially inflated by the company’s materially misleading statements and omissions about Tecfidera, its leading multiple sclerosis drug.

         The complaint relies heavily on statements by ten former Biogen employees acting as confidential witnesses. It alleges that defendants, after publicly announcing in October 2014 that a patient being treated with Tecfidera had died, both withheld material information about declining Tecfidera sales and made misleading positive statements about future revenue. Plaintiffs assert that three Biogen executives made more than twenty materially false misrepresentations and omissions during various earnings calls and conferences between December 2, 2014, and July 23, 2015.

         Defendants have moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) and the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §§ 78u-4, 78u-5.[1] Defendants contend that the complaint should be dismissed for two principal reasons. First, they contend that the complaint fails to set forth plausible allegations that the individual defendants’ statements contain actionable misrepresentations or omissions. Specifically, defendants contend that the alleged misrepresentations are either (1) forward-looking statements protected by the PSLRA safe harbor provisions, (2) immaterial statements of corporate optimism or puffery, or (3) not adequately alleged to be false at the time they were made. Second, they contend that the complaint fails to allege specific facts that give rise to a strong inference of scienter.

         As the First Circuit has recently stated, “[n]ot all claims of wrongdoing by a company make out a viable claim that the company has committed securities fraud.” Fire and Police Pension Ass’n of Colo. v. Abiomed, Inc., 778 F.3d 228, 231 (1st Cir. 2015). The complaint does not, for example, allege that Biogen’s current or historical financials are misleading because of fictitious sales, off-label marketing, inventory parking, or any similar act of corporate fraud. Rather, it alleges in substance that Biogen executives made statements about future Tecfidera sales that were misleading because they were unduly optimistic.

         Although most of the alleged misrepresentations appear to be non-actionable, after drawing all reasonable inferences on behalf of plaintiffs, the complaint alleges a plausible claim for at least one material misrepresentation or omission. However, the complaint’s allegations that defendants acted with the requisite degree of scienter fail to clear the relatively high hurdle of the PSLRA. Even assuming that defendants made a materially false or misleading statement, plaintiffs have not sufficiently alleged that defendants made those statements with a “conscious intent to defraud or ‘a high degree of recklessness.’” ACA Fin., 512 F.3d at 58 (quoting Aldridge v. A.T. Cross Corp., 284 F.3d 72, 82 (1st Cir. 2002)). Instead, the most compelling inference that can be drawn from the complaint as a whole is that defendants were, at worst, negligent, or engaged in permissible puffery. But “negligence or puffing are not enough for scienter . . . .” Automotive Indus. Pension Trust Fund v. Textron Inc., 682 F.3d 34, 39 (1st Cir. 2012). Accordingly, and for the reasons set forth below, defendants’ motion to dismiss will be granted.

         I. Factual Background

         Unless otherwise noted, all facts are stated as set forth in the complaint.[2]

         A. The Parties and Tecfidera

         Lead plaintiff GBR Group, Ltd. is a limited partnership located in Jacksonville, Florida. (Compl. ¶ 30).[3] The complaint alleges that GBR purchased Biogen securities at artificially inflated prices during the class period, which is December 2, 2014 through July 23, 2015. (Id. ¶¶ 1, 30).

         Biogen Inc. is based in Cambridge, Massachusetts. (Id. ¶ 32). It is a global biopharmaceutical company that develops, manufactures, and markets treatments for certain neurological, autoimmune, and hematological diseases, including multiple sclerosis (“MS”). (Id. ¶ 43). Biogen’s securities trade on the NASDAQ under the ticker “BIIB.” (Id. ¶ 32).

         The complaint alleges claims against Biogen and individual defendants George Scangos (the Chief Executive Officer), Paul Clancy (the Chief Financial Officer and Executive Vice President, Finance), and Stuart Kingsley (the former Executive Vice President, Global Commercial Operations). (Id. ¶¶ 33-35).

         Tecfidera is one of Biogen’s four principal drugs for the treatment of MS. (Id. ¶ 43). It is an oral pharmaceutical approved for use in the United States and European Union. (Id.).[4]Tecfidera competes with other oral MS drugs as well as injectable MS treatments. (Id. ¶ 2). After the FDA approved Tecfidera for use in March 2013, Biogen began selling it in the United States during the second quarter of 2013. (Id. ¶¶ 2, 43). In 2015, the wholesale cost of Tecfidera was approximately $70, 000 per patient per year. (Id. ¶ 43).

         The complaint alleges that Tecfidera’s revenue growth was a function of three factors: (1) the portion of new starts that Tecfidera captured (that is, patients recently diagnosed with MS and starting their treatment with Tecfidera); (2) patients switching over to Tecfidera from other drugs (referred to as “switches” or the “switch rate”); and (3) the growth of the overall market for oral MS drugs. (Id. ¶ 6). Conversely, Tecfidera revenue could be negatively affected by declining overall market growth, lower new starts, and a higher “discontinuation rate”--that is, “the rate at which patients were taken off the drug.” (Id. ¶ 8).[5]

         From its 2013 launch, Tecfidera was a significant source of revenue for Biogen, and it fueled much of the company’s growth. In 2015, Tecfidera was Biogen’s highest grossing product by more than $1 billion in revenue. (Def. Ex. 25 at 17). Defendants publicly acknowledged Tecfidera’s importance to the company. In Biogen’s quarterly reports and annual report released during the class period, the company stated that it “may be substantially dependent on sales from our principal products for many years, including an increasing reliance on sales of Tecfidera as we expand into additional markets.” (Compl. ¶ 45). In January 2015, when Biogen issued fiscal guidance for the year, the company stated that its “plan assumes Tecfidera will represent the largest contributor to our overall revenue growth.” (Id.). The following charts display quarterly and annual revenue for Tecfidera individually and for Biogen as a whole, as well as revenue growth rates. (Id. ¶ 43).[6]

Quarterly Revenue


Tecfidera Revenue ($MM)

Tecfidera Revenue QoQ Growth Rate

Biogen Revenue ($MM)

Biogen Revenue QoQ Growth Rate

Tecfidera Revenue % Biogen Revenue

2Q 2013

$ 192


$ 1, 723



3Q 2013

$ 286


$ 1, 828



4Q 2013

$ 398


$ 1, 966



1Q 2014

$ 506


$ 2, 130



2Q 2014

$ 700


$ 2, 421



3Q 2014

$ 787


$ 2, 511



4Q 2014

$ 916


$ 2, 641



1Q 2015

$ 825


$ 2, 555



2Q 2015

$ 883


$ 2, 592



3Q 2015

$ 937


$ 2, 778



4Q 2015

$ 993


$ 2, 839



Annual Revenue


Tecfidera Revenue ($MM)

Tecfidera Revenue YoY Growth Rate

Biogen Revenue ($MM)

Biogen Revenue YoY Growth Rate

Tecfidera Revenue % Biogen Revenue


$ 877


$ 6, 932




$ 2, 909


$ 9, 703




$ 3, 638


$ 10, 764



         B. The PML Death and its Impact on Tecfidera Sales

         1. The PML Death

         On October 22, 2014, Biogen released its third-quarter financial results, announcing revenues of $2.51 billion, up 3.7 percent from the previous quarter. (Id. ¶ 48). It also announced third-quarter revenue for Tecfidera of $787.1 million, which was a 12.4 percent increase from the previous quarter. (Id.). However, Tecfidera’s growth rate had decreased significantly from the growth rates of 49.1, 39.0, 27.1, and 38.5 percent in the previous four quarters. (Id. ¶ 43).

         During its earnings call, Biogen publicly announced, for the first time, that an MS patient who had taken Tecfidera for more than four years as part of a clinical study had died of progressive multifocal leukoencephalopathy (“PML”). (Id. ¶ 48). PML is an infection that is particularly dangerous for individuals with a weakened immune system. (Id. ¶¶ 4, 48).[7] During that earnings call, CEO Scangos stated:

We would like to inform you that we have confirmed a case of PML in a patient being treated from Tecfidera who recently died from complications of pneumonia. Despite this tragic loss, we believe the overall positive benefit risk profile of Tecfidera remains unchanged.
The patient was treated with Tecfidera for four and a half years as part of the ENDORSE study. During the course of therapy, the patient experienced severe lymphopenia that lasted for over three and a half years. Lymphopenia is a known risk factor for PML and can be caused by a number of factors, including treatment for MS, cancer, [and] HIV.
The current Tecfidera label includes warnings and precautions regarding lymphopenia. We reported the case to the regulatory authorities and will work with them to confirm that the language on our label provides patients and their physicians appropriate information regarding lymphopenia.

(Id. ¶ 48; Def. Ex. 7 at 3).[8]

         When the call was opened to questions from research analysts, the first question focused on Tecfidera’s future growth rate:

Question: [O]n Tecfidera, looks like the growth on a quarter on quarter basis either absolute dollars or percentage basis, it looks a little bit lower in Q3 than, say, over any of the last four or five prior quarters. Was there anything one time nature that you want to call out? Or should we just assume that drug is on a different trajectory?
Kingsley: Nothing big on a one time nature. Inventories are moderating, I think a little bit in the channel. As always a little probably difficult to predict exactly, but look, we have always expected Tecfidera’s growth rate would moderate over time. I think we are seeing a natural case of that. But we are very comfortable with the trajectory of the product right now. We’re very comfortable as we talked about the portion of new starts and switches we are getting. Nothing significantly off plan from our standpoint. I think we feel pretty good about the performance.

(Compl. ¶ 48; Def. Ex. 7 at 7-8).

         When asked a similar question about Tecfidera’s overall growth prospects moving forward, Clancy responded that “we will use the end of the year call to give our expectations going into 2015, ” but then stated, among other things, “[w]e think there is meaningful, still meaningful growth in Tecfidera in the United States, as we continue to penetrate doc[tors] and penetrate the marketplace.” (Compl. ¶ 49; Def. Ex. 7 at 9). Analysts continued to question defendants about Tecfidera’s future growth in the United States:

Question: [J]ust wanted to follow-up on the questions on Tecfidera in the US. You have gotten fairly rapidly to 20%, roughly 20% market share. Just wanted maybe your thoughts on how we should think about growth going forward.
Factors we should consider when modeling our sales going forward?
Kingsley: So look, the way to think about Tecfidera growth is what portion of new starts does Tecfidera capture?
We believe Tecfidera is capturing a nice portion of new starts and should. Physicians are comfortable putting new patients on it.
And then the bigger question, mathematically is what portion of switches. And again we believe the product is capturing a meaningful portion of switches.
There is a third factor, which is market growth. We have said, in some prior calls, that the market in the U.S. has grown faster this year than it has, historically. Some of it is what Paul talked about before, which was the switch from free to commercial patients.
There is also the dynamic of the quitter pool, we think has been favorable this year. Essentially, Tecfidera has probably kept people in the markets who might have quit the market. So you have had additional growth on that standpoint.
You also have to look at how the market growth will moderate over time as you get to the more impact of unemployment rate of affordable care and some of the change of the balance in the switcher pool. We believe we are capturing what we believe is a very attractive portion of new starts and switches, and that is where we focus our effort.

(Def. Ex. 7 at 13-14).

Finally, one analyst focused on the potential implications of the PML death:
Question: I just want to better understand the potential implications, if any, from the case of PML.
We recognized there is a background rate of PML, in lymphopenic patients including those with multiple sclerosis. We know Tecfidera does lower lymphocyte count.
Do you think in light of what’s happened here, would you prefer severely lymphopenic patients not be on Tecfidera? Do you expect that doc[tors] will reconsider use in lymphopenic patients?
And lastly, do you expect the regulators will update the label? Or will they wait for additional cases since there is a background rate in this population?
Scangos: Look, we are certainly not in a position to make medical recommendations, right? Lymphopenia, especially prolonged lymphopenia like the patient experienced is a known risk factor for PML.
Tecfidera does result in lymphopenia in a small fraction of the patients who take it. It is for that reason that lymphocyte screening is on the label.
We have reported this to the regulatory authorities. We certainly will be discussing with them whether the language on the label is appropriate to inform patients and physicians, and what is done with the lymphocyte results is I think up to the physician that is caring for those patients.

(Compl. ¶ 49; Def. Ex. 14-15).

         According to the complaint, “[a]nalysts accepted defendants’ statements that the PML death would not have a material impact on Tecfidera.” (Compl. ¶ 50). One analyst concluded his October 22 report by stating “BOTTOM LINE: We see minimal commercial impact and believe shares are overreacting to the PML report.” (Id. ¶ 53).

         A month later, on November 25, 2014, the FDA issued a warning to the public about the patient who died from PML while using Tecfidera. (Id. ¶ 54). The FDA stated that the patient was not taking any other drugs associated with PML, and it advised physicians and patients to monitor Tecfidera patients for side effects. (Id.). It further noted that “[a]s a result, information describing this case of PML . . . is being added to the Tecfidera label.” (Id.). Tecfidera’s label was updated in the United States to include the PML risk on December 3, 2014, one day after the class period began. (Def. Ex. 9 § 5.2).

         2. Confidential Witness Allegations

         The complaint essentially alleges that defendants, shortly after announcing the PML death in October 2014, knew from both internal data and discussions with physicians that the PML incident was materially affecting Tecfidera sales--an effect that their public statements fraudulently or recklessly misrepresented and concealed. (See Compl. ¶¶ 56-75). In support of its allegations, the complaint relies heavily on statements from ten confidential witnesses (“CWs”) who were formerly employed by Biogen across the country.[9] Many of the confidential witnesses were Biogen Area Business Managers (“ABMs”), defined by Biogen as a “specialty sales representative position [that is] called upon to sell our [n]eurology products [including Tecfidera] with key stakeholders in the [MS] community: including [n]eurologists, allied health professionals, and local MS chapters.” (Id. ¶ 56 n.1).

         CW1 was a Biogen ABM responsible for parts of southern Florida and Puerto Rico from November 2010 to June 2015. (Id. ¶ 56). He was five reporting levels removed from Scangos. (Id.). According to CW1, Tecfidera sales in his region “dropped steeply and immediately” after the announcement of the PML incident, and there was a “large drop” in new prescription sales of Tecfidera beginning around November 2014 for “almost all of the neurologist customers in his sales territory.” (Id.). He stated that during a “late 2014” regional conference call, his supervisor, Regional Director Robert Nelson, told ABMs that their region was “not the only region where Tecfidera sales were poor; according to Nelson sales were down in almost every region across the United States.” (Id.).

         CW2 was a Biogen Market Research Manager from 2005 to December 2014. (Id. ¶ 57). He reported to Antonio Melo, Biogen’s Senior Manager of Business Planning.[10] In November 2014, CW2 attended a Biogen “town hall” meeting led by CEO Scangos. (Id.). “According to CW2, Scangos’s presentation (which included a visual component that reflected his talking points) stated that ‘the overall sense of the trajectory [at Biogen] was changing’ following the Tecfidera PML death.” (Id.). CW2 stated that the town hall meeting also included “a presentation on potential organizational changes as a result of the PML death.” (Id.). According to the complaint, “[i]t was CW2’s understanding that the organizational changes stemmed from executive management’s expectation that the PML death would have ‘an impact on performance.’” (Id.).

         CW3 was a Biogen ABM responsible for parts of southern Florida and Puerto Rico from May 2012 to June 2015. (Id. ¶ 58). CW3 stated that “his Tecfidera sales were strong” until late 2014 or early 2015, when sales “dropped dramatically and failed to recover” by the time he left the company. (Id.). CW3 confirmed that there was a “large drop” in new Tecfidera prescription sales beginning around November 2014 for “almost all” of the neurologist customers in his territory. (Id.). According to the complaint, “[b]ased on conversations with his neurologist customers, CW3 attributed the decline in sales to the PML death and the subsequent FDA label change in November 2014.” (Id.). CW3 stated that ABMs in “other Biogen regions” conveyed to him that their Tecfidera sales had also “decreased dramatically” by January 2015. (Id.). Around March 2015, CW3 attended a national sales meeting in Texas where an unnamed person described the PML incident as a “market event, ” and stated that Tecfidera sales were “not on track.” (Id. ¶ 59). “According to CW3, [unnamed] speakers at the meeting stated that sales would need to pick up again if [Biogen] was going to meet [its] expected 14 [to] 16 percent revenue growth.” (Id.).

         CW1 also recalled a national meeting in Texas in March 2015. (Id. ¶ 60). According to CW1, “senior Biogen leaders” at the meeting “acknowledged” that the PML incident “definitely was impacting Tecfidera sales.” (Id.). CW1 also stated that during a Tecfidera “town hall” meeting led by three more senior Biogen employees, “metrics and graphs were presented that showed a sharp decline in Tecfidera sales in most regions.” (Id.). According to CW1, one presenter stated that “we understand that the market event has had an impact on sales.” (Id.).

         CW4 was a Biogen ABM responsible for parts of Kansas and northern Oklahoma from March 2006 to June 2015. (Id. ¶ 61). CW4 reported to the regional director for the midwest region, who reported to the national sales director. (Id.). “CW4 stated that his Tecfidera sales dropped appreciably very early in 2015, while sales of other MS drugs continued to do very well.” (Id.). According to CW4, “new prescription rates dropped, and physicians were transferring patients off Tecfidera and onto different therapies.” (Id.). He received quarterly sales goals from Biogen’s corporate office, but he did not meet his Tecfidera sales goals in 2015. (Id.). CW4 participated in biweekly conference calls with other regional ABMs in 2015; according to him, other “midwest region ABMs reported that they were not meeting their Tecfidera sales goals, up until the time of CW4’s departure in June 2015.” (Id.).

         CW5 was a Biogen ABM responsible for parts of North Carolina and Virginia from April 2013 to April 2015. (Id. ¶ 62). According to CW5, Tecfidera was his “lead product” by early 2014, but he recalled a “big slowdown” in Tecfidera “market expansion” beginning in late October 2014, a slowdown that he discussed with other Biogen ABMs. (Id.). CW5 stated that “there was a linkage between the PML death and the drop in Tecfidera sales.” (Id.). He also stated that other south region ABMs discussed on conference calls how “poorly” their Tecfidera sales were doing throughout the first quarter of 2015. (Id. ¶ 63). “CW5 also began to experience a serious downturn in ‘start forms’ for Tecfidera at the end [of the first quarter], from 10 to 14 per week to 3 per week around March 2015.” (Id.).

         CW6 was a Biogen ABM responsible for Montana, Idaho, and Wyoming from April 2011 to August 2015. (Id. ¶ 64). CW6 reported to a regional sales manager, who reported to a senior sales director. (Id.). “CW6 stated that prior to the October 2014 announcement of the PML death, Tecfidera had a ‘hockey stick’ (i.e., exponential) growth.” (Id.). CW6 stated that following the October 2014 announcement, his Tecfidera new starts “declined” by the end of 2014, and that his new Tecfidera prescriptions then “significantly slowed down.” (Id.). According to CW6, people were “more cautious” following the PML death. (Id.).[11] He learned during conference calls that the “decline or stoppage” in new Tecfidera patients following the PML death also occurred in other regions. (Id.). According to him, Tecfidera sales never rebounded in 2015 before his departure in August 2015. (Id.).

         CW7 was a Biogen ABM responsible for parts of Virginia, West Virginia, and Maryland from April 2011 to June 2015. (Id. ¶ 65). CW7 reported to a regional sales manager, who reported to a senior sales director. (Id.). According to the complaint, “CW7 stated that his Tecfidera sales were consistently good prior to the announcement of the PML death in October 2014, but that after the PML announcement his territory ‘took a hit’ beginning in December 2014 or January 2015.” (Id.).

         CW8 was the senior director of commercial operations for Biogen, a position “equivalent to chief of staff for the head of commercial operations, ” from August 2014 to November 2015. (Id. ¶ 66). CW8 reported to the senior vice president of “U.S. commercial.” (Id.). His responsibilities included oversight of operations related to Biogen’s MS and hemophilia drugs, including Tecfidera, and he handled operational issues related to Tecfidera on a daily basis. (Id.). According to the complaint, “CW8 stated that all of 2015 was ‘difficult’ for Tecfidera and that beginning with the ‘event in October, ’ he could not recall a time when Tecfidera’s sales prospects were not a concern.” (Id.).

         CW9 was a Biogen ABM responsible for parts of Connecticut and New York from July 2009 to March 2015. (Id. ¶ 67). He reported to a regional director of sales, who reported to a national sales director, who reported to a vice president, who reported to the senior vice president of U.S. commercial. (Id.). According to the complaint, “CW9 observed that the ABMs in his territory were not compensated for their Tecfidera sales in [the first quarter of 2015], i.e., they did not meet their Tecfidera sales for that quarter.” (Id.).

         From July 2012 to October 2015, CW10 was an executive assistant in Biogen’s “program leadership and management team, ” supporting numerous programs including Tecfidera. (Id. ¶ 68). CW10’s responsibilities included supporting the Tecfidera program executive and program director, initially Alpna Seth, who was then replaced by Uthra Sundaram before the PML announcement. (Id.). According to the complaint, “Sundaram was a ‘dotted line’ report to Scangos.” (Id.). According to CW10, Sundaram met weekly with CEO Scangos and Executive Vice President of Commercial Operations Kingsley, and quarterly with CFO Clancy. (Id. ¶ 69). “CW10 stated that after the PML death, Biogen’s sales and commercial teams monitored sales numbers through various reports.” (Id.). According to CW10, Biogen “immediately reached out to the top prescribing doctors as well as big pharmaceutical companies such as CVS Caremark and Walgreens after the PML announcement.” (Id.). CW10 stated that Biogen’s commercial team performed “deep drill downs” into sales numbers, including “reviews of specific territories that were lagging, ” and that Sundaram went on “ride-alongs” with Biogen’s medical-science liaisons to meet with doctors and “discuss the PML death.” (Id.). According to CW10, the “entire Tecfidera team” would meet during weekly program team meetings to discuss sales numbers and how the PML death affected sales. (Id. ¶ 70). CW10 stated that Sundaram “communicated with Scangos and other senior executives following those meetings.” (Id.). CW10 further stated that “Sundaram was involved in the Tecfidera label change after the PML death and knew that the label change would immediately lead to lost sales.” (Id.).

         According to the complaint, CW1 had access to his region’s sales information, including the number of prescriptions written. (Id. ¶ 71). According to CW1, his regional director would access the sales metrics of other regions to compare their region’s performance. (Id.). CW4 stated that the “company tracked sales metrics and prescriptions” and that “when a prescription was sold, Biogen’s headquarters knew about it.” (Id. ¶ 72). CW7 stated that “corporate headquarters would have had up-to-date insight into new prescription rates” because “forms needed to be filled out for every new Tecfidera prescription” and “corporate offices were given copies of th[o]se forms.” (Id. ¶ 73). According to CW7, his territory’s sales reports were updated nightly and included the identification number assigned to every new patient and the name of the prescribing neurologist. (Id.).

         According to CW1, sales goals for Tecfidera “were adjusted downward” in December 2014 to make it easier for ABMs to reach compensation goals. (Id. ¶ 74). CW1 stated that many ABMs in his region still failed to meet the lowered goals. (Id.). CW5 stated that Biogen lowered Tecfidera sales goals around the same time. (Id. ¶ 75). According to him, a Biogen vice president sent an e-mail to ABMs in January 2015 announcing that compensation thresholds for sales representatives were being lowered because of “lower guidance due to unforeseen market events.” (Id.). According to the complaint, CW5 understood the market events to be “based on problems with Tecfidera sales.” (Id.).

         C. Overview of the Class Period Timeline

         The complaint alleges that “[f]ollowing the announcement of the PML death and the FDA’s advisory, and contrary to the material decrease in sales reported internally by sales personnel across all regions, defendants publicly dismissed concerns that the PML death would materially impact Tecfidera performance . . . . [and] reassured investors that Tecfidera would continue to drive double-digit revenues for Biogen in 2015.” (Id. ¶ 76).

         On October 22, 2014, before the start of the class period, Biogen released third quarter 2014 financial results and announced the PML incident. (Id. ¶¶ 48-49). CFO Clancy and Doug Williams (Biogen’s executive vice president of research and development) spoke on an investor conference call on December 2, 2014. (See Id . ¶¶ 106-08). CEO Scangos spoke during a healthcare conference on January 12, 2015. (See Id . ¶¶ 108-10).

         On January 29, 2015, Biogen announced fourth-quarter results, reporting Tecfidera revenues of $916 million, up 16.4 percent from the third quarter, which was 34.7 percent of total Biogen revenue. (Id. ¶ 77). As part of its practice to issue projected revenue guidance twice per year, defendants projected annual Biogen revenue growth of 14 percent to 16 percent for 2015. (Id.). Biogen’s stock rose 0.6 percent on January 29, 2015, and 10.2 percent the next day. (Id. ¶ 77 n.3). Scangos, Clancy, and Kingsley all spoke during the earnings call. (See Id . ¶¶ 111-19). Analysts reacted positively to Biogen’s fourth-quarter earnings and defendants’ statements during the call. (See Id . ¶¶ 121-27).

         After fourth-quarter earnings, Kingsley spoke during a February 25, 2015 healthcare conference. (See Id . ¶¶ 128-30). Scangos also spoke during a March 2, 2015 healthcare conference. (See Id . ¶¶ 131-32).

         On April 24, 2015, Biogen released disappointing first-quarter earnings, announcing Tecfidera revenue of $825 million, which was below the market’s consensus estimates and a 9.9 percent decrease from the previous quarter. (Id. ¶ 85). On a company level, Biogen’s total revenue decreased 3.2 percent from the previous quarter. (Id. ¶ 43). The complaint alleges that the earnings call on April 24 was the “first time [that] defendants partially acknowledged that the PML death was impacting Tecfidera sales.” (Id. ¶ 85). In response, Biogen’s stock price decreased 6.6 percent on April 24. (Id.). However, maintaining their practice of providing revenue guidance only twice per year, defendants did not change the projected annual revenue growth for Biogen of 14 to 16 percent that they had released after announcing fourth-quarter results in January. (Id. ¶ 86). Instead, Clancy stated, “If [Tecfidera’s] U.S. trajectory does not improve, we may come in at the lower end of our previously provided [annual] revenue growth.” (Id. ¶ 135).

         After announcing first-quarter earnings, Clancy spoke during a healthcare conference on May 6, 2015. (See Id . ¶¶ 139-40). A week later, Williams, not a named defendant in this action, spoke during a May 13 healthcare conference. (See Id . ¶¶ 141-42). A week later, Kingsley spoke during a May 19 healthcare conference. (See Id . ¶¶ 143-44). A week later, Clancy spoke during a May 27 strategic decisions conference. (See Id . ¶¶ 145-47). On May 27, 2015, Biogen’s stock price increased 2.5 percent, closing at $402.92. (Id. ¶¶ 93, 147).

         On July 24, 2015, the day after the end of the class period, Biogen released second-quarter earnings. It announced Tecfidera revenue of $883 million, a 7.1 increase from the first quarter, but still less than the $916 million in revenue earned during the fourth quarter of 2014. (Id. ¶ 43). Biogen’s total revenue increased 1.4 percent from the first quarter. (Id.).

         Biogen revised its full-year 2015 revenue guidance, stating that “[r]evenue growth is expected to be approximately 6 percent to 8 percent compared to 2014 [down from the January estimate of 14 percent to 16 percent], a decrease from prior guidance based largely on revised expectations for the growth of Tecfidera. Our balance of year forecast assumes limited patient growth for Tecfidera in the United States.” (Id. ¶ 94; Def. Ex. 23 at 6).

         During the earnings call, Scangos stated:

We had expected to see a reacceleration of Tecfidera, but that did not happen to any appreciable extent. Rather Tecfidera experienced modest sequential patient growth, as we continued to work through the same commercial challenges experienced in the first quarter. We continue to believe that Tecfidera remains the preferred oral option in the MS market, based on its strong efficacy and favorable safety profile, and we’re working hard across the organization to improve Tecfidera’s trajectory.

(Compl. ¶ 150; Def. Ex. 23 at 3).

         Kingsley stated:

In light of continued headwinds affecting Tecfidera, we saw moderated patient growth for our MS portfolio as a whole this quarter.
Our 2015 business plan for Tecfidera made two important assumptions: First, that Tecfidera would continue to stimulate higher than historical market growth and switch rates, as it drives the market from injectables to orals. And second, that Tecfidera, with what we believe is a strong all-in profile, would continue to capture a high rate of both new starts and switches. Through the second quarter, both of these were weaker than planned, particularly in the more mature and larger markets in the U.S. and Germany.
In the US, total market growth and switch rates remained lower than our original expectations, and appear to have returned to historical averages typically seen in the market before the launch of Tecfidera. We believe the safety event reported in late 2014 has created greater caution on the part of both physicians and patients about switching to orals. Our U.S. market research indicates a moderation in physician intent to prescribe, though in Q2, Tecfidera continued to gain patients in the US.

(Compl. ¶ 150; Def. Ex. 23 at 5).

         During the call, Kingsley responded to a question by stating, in part, “[l]ook, the first PML case was a pretty significant change statement for the profile of Tecfidera, given its very pristine safety profile at the time.” (Compl. ¶ 152; Def. Ex. 23 at 10). An analyst asked “when you thought about Tecfidera and flat sales, how much--to what extent do you think there will be people stopping [the] drug versus just minimal growth?” Williams responded:

Certainly one of the dynamics that we’ve seen, that we didn’t expect was a modest but not trivial increase in discontinuations in Tec[fidera] in the United States in particular. That[] probably, we think, traces back to the monitoring to some extent. It traces back to efficacy breakthroughs, which is typical for most of the disease modifying or majority traces to [] some of the GI. So that is, both dynamics are actually happening. We’re hopeful that we can actually bring that back to a bit normal state, but TBD, as we move forward.

(Compl. ¶ 153; Def. Ex. 23 at 13).

         The market and analysts reacted negatively (Compl. ¶¶ 151-58), and Biogen’s stock price decreased $85, or 22 percent, on July 24. (Id. ¶¶ 96, 154). The 22 percent decline occurred on unusually heavy trading volume, with 16.6 million shares traded compared with an average daily trading volume over the class period of 1.8 million shares. (Id. ¶ 154).

         After the class period, during a September 18, 2015 healthcare conference, Kingsley stated “[i]t was clear to us that we were going to get a--some kind of a downtick in the safety profile that would have some kind of an impact on physician behavior, but we couldn’t tell.” (Id. ¶ 98). He added that “the [Tecfidera] label was so clean [before the PML incident], the first PML event was a pretty big change statement for a broad base of physicians who were very comfortable with having essentially no safety issues.” (Id.).

         On October 9, 2015, Biogen announced that Kingsley was leaving the company. (Id. ¶ 99). Twelve days later, the company announced that it would eliminate approximately 11 percent of its workforce. (Id. ¶ 101).

         D. Defendants’ Statements During the Class Period

         Below are the alleged materially false misrepresentations and omissions that defendants made during the class period. They occurred on ten dates between December 2, 2014, and May 27, 2015. Again, bolded text indicates the portion of the statements pleaded in the complaint, and italicized text indicates the specific portions of the statements that plaintiffs allege is actionable. All other text is provided for context.

         1. December 2, 2014--Clancy on Analyst Call

         The complaint alleges that Clancy made the following false and misleading statements about Tecfidera’s “market share and discontinuation rates” during a conference call on the first day of the class period, December 2, 2014.

Question: As you mentioned on the third-quarter call, [Tecfidera], it’s capturing- -Tecfidera is capturing around a third of new patients and 40% of the switch market. Do you think at this point Tecfidera is settling nicely at 35% market share in the overall market? Or where do you see Tecfidera going?
Clancy: Yes, usually your share of new starts in a market like [MS] ends up being a leading indicator of where you settle in. I think kind of jumping to that right now is a little bit of a stretch.
We still feel the market, broadly speaking, is moving to orals and the indicators that we have is that Tecfidera is unquestionably the leading oral. Where this settles out kind of on a U.S. basis, on a world-wide basis is a TBD, but we think there’s plenty of tailwind still left.
Question: A question about like first-line. Given [Tecfidera] is more effective, theoretically you could be on this drug longer than, say, a first-line Avonex treatment. Do you have any sense--and it’s not been long enough, but do you have any sense of how this is going to change duration of the first-line therapy versus, say, an Avonex in the first line?
Clancy: The initial launch it didn’t get--in the United States, it didn’t get first-line. What we saw, which we always thought we would see, is some stickiness in the interferons and Copaxone as well. That is obviously changing the deeper we get into launch.
So I think theoretically, yes, we could see that. Discontinuation rates, which people want to kind of be mindful of are tracking in the teens as well, so that is very consistent. We had always hoped that [those] would be a little bit lower, just being an oral therapy. There is not flu-like symptoms.
But Tecfidera has the GI, as people know, and patients do obviously break through all therapies at some point in their disease progression. We hope that Tecfidera--we can get better performance in the discontinuation rates over a longer period of time. All those factors can help.
Question: How soon do you think you could bring those down or what is the salesforce doing to lower the discontinuation rate and [educate] . . . ?
Clancy: It’s more than the salesforce. I think it’s actually the patient service model that we have and have had for a long period of time. I think it is the product profile that inherently is more favorable, just from a relapse rate reduction. So from an efficacy perspective, oral is obviously easier and tolerated from a patient perspective.
Question: Okay. Everyone asks me still, even though you’ve commented on this before, about the PML case and whether or not there will be a label change. Any updated thoughts? Any conversations with the FDA; updated thoughts about that?
Clancy: We are obviously in conversations with the FDA. We expect a label change. The details of that--we have some visibility of that, but we can’t really talk about that. It just actually wouldn’t be--whatever we would say would end up being slightly different by the time we get it.
I think the timing on it is hard to tell. I think . . . it leans closer to nearer in than a long time away. So, yes, we will just have to see when that comes. And that will--most of what I just said was related to the United States. Other parts of the world either have it in the label or will kind of update it as they see fit.

(Compl. ¶ 106; Def. Ex. 8 at 2-4).

         The complaint alleges that Clancy’s statements that “the indicators that we have is that Tecfidera is unquestionably the leading oral” and that he believed there was “plenty of tailwind still left” were false and misleading because he “knew there had been a ‘big slowdown’ in Tecfidera market expansion by November 2014 and that sales were down in almost every region in the United States.” (Compl. ¶ 107).

         2. January 12, 2015--Scangos at Conference

         The complaint alleges that Scangos made the following false and misleading statements about Tecfidera’s “ability to drive business” during a healthcare conference on January 12, 2015.

Scangos: So, 2014 was a really good year for Biogen [] and we believe that this can be sustained going into the future. Our core business based on our existing suite of products is robust, products continue to do well. The products that we launched recently will continue to be major drivers and will play an increasingly large part in our pipeline obviously as we go forward. We believe that [Tecfidera] will continue to be a major business driver as it continues to expand in markets where it’s already been introduced and as we introduce it into additional markets around the world. And we believe that the mid and late stage programs are delivering and we have a very exciting early stage pipeline so we believe we can continue this momentum well into the future.

(Id. ¶ 108; Def. Ex. 10 at 5).

         The complaint alleges that the italicized statements were false and misleading because “of the immediate and significant impact the PML death had on Tecfidera sales in late 2014 and into 2015.” (Compl. ¶ 109).

         3. January 29, 2015--Annual Earnings Call and Guidance

         a. 2015 Revenue Guidance

         On January 29, 2015, Biogen issued a Form 8-K containing a press release in which it announced 2014 earnings and released full-year 2015 financial guidance. The company projected annual revenue growth of 14 to 16 percent for 2015. (Id. ¶ 102).[12] The complaint alleges that defendants’ failure to disclose (1) the steep decline in Tecfidera sales, including the impact of “slowing new starts and high discontinuation rates, ” and (2) the “true impact of the PML death on physician confidence in Tecfidera” rendered Biogen’s guidance false and misleading. (Id.).

         b. Earnings Call

         Later that day, Scangos, Clancy, and Kingsley gave opening statements and responded to analysts’ questions during Biogen’s earnings call. The complaint alleges that defendants made the following false and misleading statements during their opening statements.

Scangos: Tecfidera is in its second year on the market in the U.S. in 2014. We successfully launched Tecfidera in the EU and are continuing to expand its presence across the globe. Tecfidera is now the most prescribed MS therapy in Germany and the most prescribed oral therapy in the US, with more than 135, 000 people having been treated worldwide.
As you all know from the IMS data, Tecfidera did experience moderating growth in Q4, which we believe is due to a variety of factors that Tony [Kingsley] will discuss in more detail. However, we believe that Tecfidera will continue to grow in [the] U.S. and will grow substantially in international markets, so that we anticipate that 2015 will be another ...

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