United States District Court, D. Massachusetts
IN RE BIOGEN INC. SECURITIES LITIGATION
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO
Dennis Saylor, IV United States District Judge
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.
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.
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. 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.
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.
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.
otherwise noted, all facts are stated as set forth in the
The Parties and Tecfidera
plaintiff GBR Group, Ltd. is a limited partnership located in
Jacksonville, Florida. (Compl. ¶ 30). 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,
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.
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).
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.).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).
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. ¶
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 $1 billion in revenue. (Def.
Ex. 25 at 17). Defendants publicly acknowledged
Tecfidera’s importance to the company. In
Biogen’s quarterly reports and annual report released
during the class period, the company stated that it
“may be substantially dependent on sales from our
principal products for many years, including an increasing
reliance on sales of Tecfidera as we expand into additional
markets.” (Compl. ¶ 45). In January 2015, when
Biogen issued fiscal guidance for the year, the company
stated that its “plan assumes Tecfidera will represent
the largest contributor to our overall revenue growth.”
(Id.). The following charts display quarterly and
annual revenue for Tecfidera individually and for Biogen as a
whole, as well as revenue growth rates. (Id. ¶
Tecfidera Revenue ($MM)
Tecfidera Revenue QoQ Growth Rate
Biogen Revenue ($MM)
Biogen Revenue QoQ Growth Rate
Tecfidera Revenue % Biogen Revenue
$ 1, 723
$ 1, 828
$ 1, 966
$ 2, 130
$ 2, 421
$ 2, 511
$ 2, 641
$ 2, 555
$ 2, 592
$ 2, 778
$ 2, 839
Tecfidera Revenue ($MM)
Tecfidera Revenue YoY Growth Rate
Biogen Revenue ($MM)
Biogen Revenue YoY Growth Rate
Tecfidera Revenue % Biogen Revenue
$ 6, 932
$ 2, 909
$ 9, 703
$ 3, 638
$ 10, 764
The PML Death and its Impact on Tecfidera
The PML Death
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).
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,
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).
the call was opened to questions from research analysts, the
first question focused on Tecfidera’s future growth
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
(Compl. ¶ 48; Def. Ex. 7 at 7-8).
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
Factors we should consider when modeling our sales going
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
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).
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).
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 §
Confidential Witness Allegations
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. 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).
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.”
a Biogen Market Research Manager from 2005 to December 2014.
(Id. ¶ 57). He reported to Antonio Melo,
Biogen’s Senior Manager of Business
Planning. 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.’”
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.”
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.).
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.).
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.).
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.). 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.
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.”
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.).
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
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.”
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.
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.).
Overview of the Class Period Timeline
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).
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 .
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).
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).
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).
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).
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.).
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).
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).
In light of continued headwinds affecting Tecfidera, we saw
moderated patient growth for our MS portfolio as a whole this
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).
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?”
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).
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).
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.).
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).
Defendants’ Statements During the Class
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
December 2, 2014--Clancy on Analyst Call
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
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
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
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
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
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
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).
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).
January 12, 2015--Scangos at Conference
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).
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).
January 29, 2015--Annual Earnings Call and
2015 Revenue Guidance
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). 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.).
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
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 ...