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Metzler Asset Management GmbH v. Kingsley

United States District Court, D. Massachusetts

March 27, 2018

METZLER ASSET MANAGEMENT GMBH and ERSTE-SPARINVEST KAPITALANLAGEGESELLSCHAFT MBH, on Behalf of Themselves and All Other Similarly Situated Parties, Plaintiffs,


          SAYLOR, J.

         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 plaintiffs Metzler Asset Management GmbH and Erste-Sparinvest Kapitalanlagegesellschaft mbH have 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 amended complaint relies heavily on statements by 17 former Biogen employees acting as confidential witnesses. It alleges that defendants withheld material information about Tecfidera's safety profile and declining Tecfidera sales, and made misleading positive statements about future revenue. It further asserts that several Biogen executives made 31 materially false misrepresentations and omissions during various earnings calls and conferences over a one-year period between July 23, 2014, and July 23, 2015.

         Defendants have moved to dismiss the complaint for two principal reasons. First, they contend that plaintiffs' claims are barred by the doctrine of claim preclusion, or res judicata, in light of this Court's dismissal of a suit raising similar claims in In re: Biogen Inc. Sec. Litig. (“Biogen I”), 193 F.Supp.3d 5 (D. Mass. 2016), aff'd 857 F.3d 34 (1st Cir. 2017). While the claims in this suit are largely identical to those in Biogen I, because the Biogen I putative class was never certified, lead plaintiffs in this suit are not bound by this Court's earlier decision. Claim preclusion therefore does not bar this action.

         Second, defendants have moved to dismiss for failure to state a claim 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 fails to set forth plausible allegations that the individual defendants' statements contain actionable misrepresentations or omissions. Specifically, defendants argue that the alleged misrepresentations, including nine that are newly alleged and were not included in the original action, are not adequately alleged to be false at the time they were made. In addition, they contend that the complaint fails to allege specific facts that give rise to a strong inference of scienter.

         As the First Circuit has observed, “[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 amended complaint does not, for example, allege that Biogen's current or historical financial statements 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 Tecfidera's risks and future sales that were misleading because they were unduly optimistic and minimized the impact of adverse events.

         Although most of the newly alleged misrepresentations do not appear to be actionable, after drawing all reasonable inferences on behalf of plaintiffs, the complaint alleges a plausible claim that at least six statements (or omissions) constitute material misrepresentations-three that are repeated from Biogen I, and three that are newly alleged. However, the complaint's allegations that defendants acted with the requisite degree of scienter fail to clear the relatively high hurdle of the PSLRA. In other words, 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. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008) (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. See Auto. Indus. Pension Trust Fund v. Textron Inc., 682 F.3d 34, 39 (1st Cir. 2012) (“negligence or puffing are not enough”).

         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 amended complaint.[1] Because the vast majority of the amended complaint overlaps with the complaint in Biogen I, this section will largely address new witnesses and allegations.

         A. The Parties and Tecfidera

         Lead plaintiff Metzler Asset Management GmbH (“Metzler”) is a German capital investment company located in Frankfurt, Germany. (Compl. ¶ 36).[2] Lead plaintiff Erste-Sparinvest Kapitalanlagegesellschaft mbH (“Erste-Sparinvest”) is an Austrian investment company located in Vienna, Austria. (Id. ¶ 37). The complaint alleges that Metzler and Erste-Sparinvest purchased Biogen securities at artificially inflated prices during the class period, which is July 23, 2014, through July 23, 2015. (Id. ¶¶ 1, 36-37).

         Biogen Inc. is a publicly-traded corporation based in Cambridge, Massachusetts. (Id. ¶ 38). It is a biopharmaceutical company that develops, manufactures, and markets treatments for certain neurological, autoimmune, and hematological diseases, including multiple sclerosis (“MS”). (Id. ¶ 48). Biogen's securities trade on NASDAQ under the symbol “BIIB.” (Id. ¶ 38).

         Tecfidera is one of Biogen's four principal drugs for the treatment of MS. (Id. ¶ 48). It is an oral pharmaceutical approved for use in the United States and European Union. (Id.).[3] It competes with other oral MS drugs as well as injectable MS treatments. (Id. ¶¶ 2, 14, 67). After the FDA approved Tecfidera for use in March 2013, Biogen began selling it in the United States in mid-2013. (Id. ¶¶ 2, 48). In 2015, the wholesale cost of the drug was approximately $70, 000 per patient per year. (Id. ¶ 48).

         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, producing $1 billion in revenue more than the second-place product. (Def. Ex. 24 at 16).[4] Defendants have 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. ¶ 50).

         On October 22, 2014, 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. ¶ 10). PML is an infection that is particularly dangerous for individuals with a weakened immune system, including those with low white blood cell counts. (Id.).[5]

         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. ¶ 83). 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. (Def. Ex. 13 § 5.2). Tecfidera's original label, dated March 27, 2013, had already disclosed the risk that “Tecfidera may cause lymphopenia.” (Def. Ex. 1 at 1).[6]

         On July 24, 2015, Biogen cut its guidance for revenue growth in half, attributing the change to the decline in Tecfidera's recent financial performance. (Compl. ¶ 159). That day, Biogen's stock price fell over 20%, and there was unusually heavy trading volume in the stock. (Id. ¶ 161).

         B. New Witness Allegations

         The amended 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. ¶¶ 39-41).

         The complaint essentially alleges that defendants knew from both internal data and discussions with physicians that Tecfidera potentially weakened patients' immune systems and that the PML incident materially affected Tecfidera sales--effects that their public statements fraudulently or recklessly misrepresented and concealed. In support of its allegations, the complaint relies heavily on statements from 17 confidential witnesses (“CWs”) who were formerly employed by Biogen in various capacities across the country.[7] 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. ¶ 68 n.2).

         1. New Confidential Witnesses

         Plaintiffs in Biogen I offered statements from ten confidential witnesses. The Biogen II complaint adds seven additional confidential witnesses. The statements of the seven new witnesses may be summarized as follows.

         CW 11 was a Biogen senior territory business manager responsible for Pennsylvania from September 2012 to January 2016. (Id. ¶ 88). His largest client was the University of Pennsylvania Medical Center. (Id.). He provided “several internal Biogen documents that corroborate” plaintiffs' claims. (Id.). His “sales of Tecfidera dropped precipitously immediately after the [PML death] announcement.” (Id. ¶ 90). In addition, his 2015 mid-year review quoted an internal Biogen e-mail from “early 2015 stating that the company was cutting sales goals for Tecfidera . . . for the second quarter.” (Id. ¶ 94).[8] CW 11's Tecfidera sales goals were lowered throughout 2015; by Q3 2015, his sales goal was 44 units, whereas it had been 95 units one year before. (Id. ¶ 95). By contrast, his sales goal for another Biogen MS drug, Tysabri, remained stable throughout the class period. (Id. ¶ 96).

         In mid-2015, CW 11 also received a slide deck titled “2015 Q2 Quarterly Business Review-Philadelphia West.” (Id. ¶ 97). The slide deck stated:

In the oral market Tecfidera is down and Gilenya is up.[9] Major factors: SAFETY is a major concern at Penn. PML and low lymphocyte counts (in the upwards of 4 months after being [discontinued]) seem to have the most impact on their use of Tecfidera. In addition, they have seen breakthrough with Tecfidera patients and believe Gilenya is more efficacious. Copaxone is considered their safest alternative.[10]

         CW 12 was a Biogen ABM responsible for the Atlanta area from March 2009 to July 2015. (Id. ¶ 68). The complaint does not specify to whom CW 12 reported, although his 2014 year-end review was written by Regional Director Craig Brown. (Id.). According to the complaint, Brown wrote “that CW 12's performance took a negative [turn] ‘due to a noncommercial event which impacted your number one MS volume and influencer account [Shepherd Center].” (Id.). Around that time, Brown also wrote that

Dr. Ben Thrower [of the Shepherd Center] and his partners began removing patients from Tecfidera, and the number of new starts and referrals subsequently plummeted. Dr. Thrower's actions began a domino effect in the territory which caused some of your community based neurologist[s] to also change their prescribing patterns away from Tecfidera. At the conclusion of Q3, you fell short of your Tecfidera new patient start goal . . . .

(Id.). Brown later added, “your Atlanta South territory is one of [the] few in the nation that has a BIIB [Biogen] share above 50%.” (Id. ¶ 87).

         CW 13 was a Biogen employee located in the company's Raleigh, North Carolina office from September 2012 to July 2016. (Id. ¶ 124). His titles during that time period included MS Case Manager, Active Support Coordinator, and Patient Services Coordinator. (Id.). As an MS Case Manager, he supported Biogen's MS sales team. (Id.). He was at least five managerial levels below the named defendants. (Id.). CW 13 stated that immediately following the PML death, “new start[s]” of Tecfidera dropped and there were regular meetings with his immediate supervisors to discuss turning around the situation. (Id. ¶ 125). CW 13 further believed that senior company executives had extensive sales reports on key metrics, and received them on at least a quarterly basis. (Id. ¶ 134).

         CW 14 was a Biogen ABM responsible for parts of New York and Pennsylvania from July 2012 to February 2016. He was five managerial levels below Kingsley. (Id. ¶ 126). CW 14 recalled “lots of discontinuations” of existing Tecfidera patients immediately after the PML death was announced. (Id. ¶ 127). He further stated that there were non-regularly scheduled conference calls in the “East Division, ” in which his territories were located, following the PML announcement. (Id. ¶ 129). Such calls were attended by ABMs from his division, and many reported declining Tecfidera sales. (Id.).

         CW 15 was a Biogen employee located in the company's Cambridge, Massachusetts headquarters from February 2012 to November 2014. (Id. ¶ 60). He was the Manager of Medical Research in Global Medical and previously served as a medical affairs scientist, scientific writer, and senior scientific writer. (Id.). He was five reporting levels below Scangos. (Id.).

         CW 15 stated that when he was a senior scientific writer (August 2013 to July 2014), he worked on a prepared response “for any PML case associated with Tecfidera.” (Id. ¶ 61). According to him, the company's marketing and communication departments decided to prepare a response to such an incident soon after Tecfidera's approval and release to the public in 2013. (Id.). He stated that “a Tecfidera-linked PML case was a matter of ‘when, not if.'” (Id.). The prepared response was approved by “G8, ” which was Scangos's term for his senior executive leadership team, approximately three months before the first PML case linked to Tecfidera was reported. (Id. ¶ 62).

         CW 16 was a former Senior Vice President for Biogen's Worldwide Medical Organization. (Id. ¶ 142). He was the Head of Medical Affairs from January 2014 to March 2016. (Id.). He stated that Biogen senior executives knew of “external communication measures” that the company's medical teams were undertaking in response to the PML death. (Id.).

         CW 17 was a former Executive Territory Business Manager and Field Trainer for Biogen from September 2007 to November 2015. (Id. ¶ 130). He reported to Regional Director Karen Grant. (Id.).[11] CW 17 sold pharmaceutical products for Biogen, including Tecfidera, and stated that his sales dropped by at least 25% following the PML death. (Id.).

         2. New Allegations by Previously Identified Confidential Witnesses

         In addition, plaintiffs offer additional supporting allegations from four previously identified confidential witnesses. Their new statements may be summarized as follows.

         CW 1 was a Biogen ABM responsible for parts of southern Florida and Puerto Rico from November 2010 to June 2015. (Id. ¶ 100).[12] He was five reporting levels below Scangos. (Id.). According to CW 1, by December 2014, Biogen's neurologist customers were taking their patients off Tecfidera. (Id. ¶ 101). He stated that Tecfidera had some immune-suppressive properties and that after the PML death, the drug was considered an immune-suppressive agent. (Id.).

         Similar to other ABMs, CW 1's sales of Tecfidera declined toward the end of 2014. (Id. ¶ 102). He first became aware of “a severe drop in Tecfidera sales” when there were “emergency” Biogen conference calls in December 2014 and January 2015. (Id. ¶ 103). These calls were led by Senior Vice President of U.S. Commercial Joe Ciaffoni and Senior Sales Director Keith Ferguson. (Id.). CW 1 recalled that slide decks were distributed in advance of these calls, and that they showed an increase in discontinuations nationally. (Id.). In addition, CW 1 personally saw a decline in Tecfidera sales in his area, including his largest customer, the MS Center at the University of Miami. (Id. ¶ 104). He also spoke with other ABMs, who similarly stated that Tecfidera prescriptions were down at other MS treatment centers. (Id. ¶ 106).

         CW 3, like CW 1, was a Biogen ABM responsible for parts of southern Florida and Puerto Rico from May 2012 to June 2015. (Id. ¶ 108). He was also five reporting levels below Scangos. (Id.). CW 3 saw a decline in prescriptions of Tecfidera after the PML announcement, and recalled neurologists at the University of Miami telling him in November 2014 that they “were not going to write Tecfidera prescriptions for new patients unless the patient specifically asked to be put on Tecfidera.” (Id.). Beginning in January 2015, he participated in regularly scheduled conference calls for the Southeast Region, during which other ABMs also reported large declines in Tecfidera sales. (Id. ¶¶ 109, 113).

         Both CW 1 and CW 3 stated that Biogen instructed ABMs “to downplay the significance of the PML death in order to convince doctors to continue to prescribe Tecfidera.” (Id. ¶¶ 110-11). In particular, “medical science liaisons” made appointments with neurologists to discuss the PML death. (Id. ¶ 110). These meetings reflected Biogen's efforts at “damage control.” (Id. ¶ 111).

         CW 7 was a Biogen ABM responsible for parts of Virginia, West Virginia, and Maryland from April 2011 to June 2015. (Id. ¶ 119). CW 7 reported to a regional sales manager, who reported to the Senior Sales Director-East. (Id.).[13] According to the complaint, although CW 7 “could not recall exact numbers, ” the drop in Tecfidera sales “was big enough that he and his territory team consistently missed their sales goals . . . .” (Id.). He further recalled attending a National Sales Meeting in March 2015, during which declining Tecfidera sales were discussed and acknowledged. (Id. ¶ 121).

         CW 8 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. ¶ 122). CW8 reported to the Senior Vice President of U.S. Commercial. (Id.).[14] According to CW 8, Tecfidera sales were adversely impacted immediately following the PML death. (Id.). He added that Ciaffoni would meet Scangos's “G8” at least once a month. (Id. ¶ 140).

         3. New Allegations by Dr. Thrower and Dr. Zamvil

         In addition to the new confidential witness allegations, plaintiffs offer statements by two physicians in support of the complaint.

         Dr. Ben Thrower is the medical director of the Shepherd Center, a private, not-for-profit hospital in the Atlanta area. (Id. ¶ 63). Between 2010 and 2013, he was involved in a clinical trial that Biogen conducted for Tecfidera. (Id.). He also serves as a clinical instructor of neurology at Emory University, and as a Senior Medical Advisor to the Multiple Sclerosis Foundation. (Id. ¶ 64).

         The Shepherd Center was the “leading prescriber of Tecfidera in the United States among MS centers” as of August 1, 2014. (Id. ¶ 65). On that date, the Shepherd Center had approximately 400 patients taking Tecfidera. (Id.). However, during spring 2014, the center had begun monitoring for possible side effects of MS patients taking Tecfidera by taking additional blood tests. (Id.). Doctors noted that “there was an elevated risk of developing low lymphocyte counts among patients on Tecfidera.” (Id.). In August 2014, Dr. Thrower notified Biogen employees Keith Ferguson, a senior sales director, and Eric Hall, a medical science liaison, that Tecfidera was causing declining lymphocyte counts in about 30% of patients taking Tecfidera. (Id. ¶ 66).

         Afterward, physicians at the Shepherd Center stopped prescribing Tecfidera for new MS patients, and discontinued it for at least half of the 400 patients already taking the drug. (Id. ¶ 67). The center informed Ferguson, Hall, and an individual named Todd Burks of this development. (Id.).[15]

         Dr. Scott Zamvil is a neurologist at the University of California-San Francisco Medical Center who specializes in MS treatment. (Id. ¶ 69). He has conducted extensive research and published studies about MS and MS treatments. (Id.). He recalled Shepherd Center doctors telling him in summer 2014 about the lymphocyte-count decline in patients taking Tecfidera. (Id. ¶ 70). In addition, he recalled Dr. Guy Buckle of the Shepherd Center telling him in March 2015 that the center had alerted Biogen about its findings. (Id.).

         Dr. Zamvil also asserts that he was one among many doctors who went through “Biogen brainwashing” concerning Tecfidera's safety profile. (Id. ¶ 71). After the drug was launched in spring 2013, he prescribed it for many of his MS patients, believing it was a safe option. (Id.). However, in February 2015, he conducted his own study, and like the Shepherd Center, found that Tecfidera lowered patients' lymphocyte counts and left them susceptible to PML. (Id. ¶ 72).[16] His findings were published in an article released on February 12, 2015. (Id.). Following the PML death and the release of his study, Dr. Zamvil stopped prescribing Tecfidera and discontinued the drug for many of his patients. (Id. ¶ 74).

         C. Overview of the Class Period Timeline

         Plaintiffs in this case have alleged an extended class period: the Biogen I class period was from December 2, 2014, to July 23, 2015, but the Biogen II class period is from July 23, 2014, to July 23, 2015. (Id. ¶ 1).

         The complaint alleges that “[o]n July 23, 2014, the first day of the class period . . . Biogen held an earnings call with analysts.” (Id. ¶ 166). Defendants Scangos, Clancy, and Kingsley participated in the earnings call. (Id.). That same day, Biogen also issued a press release touting its 2014 second-quarter financial results, increasing its “full-year financial guidance” because of “the growth of Tecfidera in the U.S. and the E.U.” (Id. ¶ 170-71).

         Another press release was issued on September 11, 2014. (Id. ¶ 176). Like the July 23 press release, this statement “continued to extol the safety profile of Tecfidera.” (Id.). However, on October 22, 2014, Biogen released third-quarter 2014 financial results and announced the PML incident. (Id. ¶ 178). CFO Clancy spoke on an investor conference call on December 2, 2014. (See Id. ¶¶ 192-93). CEO Scangos spoke during a healthcare conference on January 12, 2015. (See Id. ¶¶ 194-95).

         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. ¶¶ 48, 143). 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. ¶ 144). Biogen's stock rose 0.6 percent on January 29, 2015, and 10.2 percent the next day. (Id. ¶ 209). Scangos, Clancy, and Kingsley all spoke during the earnings call. (See Id. ¶¶ 197-208). Analysts reacted positively to Biogen's fourth-quarter earnings and defendants' statements during the call. (See Id. ¶¶ 210-16).

         After fourth-quarter earnings, Kingsley spoke during a February 25, 2015 healthcare conference. (See Id. ¶¶ 147-49). Scangos also spoke during a March 2, 2015 healthcare conference. (See Id. ¶ 257).

         On April 24, 2015, Biogen released disappointing 2015 first-quarter earnings, announcing Tecfidera revenues of $825 million, which were below the market's consensus estimates and a 9.9 percent decrease from the previous quarter. (Id. ¶ 150). On a company level, Biogen's total revenue decreased 3.2 percent from the previous quarter. (Id. ¶ 48). 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. ¶ 150). In response, Biogen's stock price decreased 6.6 percent on April 24. (Id.). However, maintaining their practice of providing revenue guidance only twice a 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. ¶ 151). 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. ¶ 222).

         After announcing first-quarter earnings, Clancy spoke during a healthcare conference on May 6, 2015. (See Id. ¶¶ 227-28). A week later, Executive Vice President of R&D Doug Williams (not a named defendant in this action) spoke during a May 13 healthcare conference. (See Id. ¶ 229-30). Two weeks later, Clancy spoke during a May 27 strategic-decisions conference. (See Id. ¶¶ 231-33). On May 27, 2015, Biogen's stock price increased 2.5 percent from the previous day, closing at $402.92. (Id. ¶ 158).

         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 percent increase from the first quarter, but still less than the $916 million in revenue earned during the fourth quarter of 2014. (Id. ¶ 48). Biogen's total revenue increased 1.4 percent from the first quarter. (Id.).

         At that point, 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.” (Id. ¶ 159). “Our balance of year forecast assumes limited patient growth for Tecfidera in the United States.” (Id. ¶ 28).

         During the earnings call, Scangos stated, “We had expected to see a reacceleration of Tecfidera, but that did not happen to any appreciable extent.” (Id. ¶ 236). Kingsley also stated:

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.

(Id. ¶ 236).

         During the call, Kingsley responded to a question by stating, in part, “[the first PML case was a pretty] significant change statement for the profile of Tecfidera, given its very pristine safety profile at the time.” (Id. ¶ 238). 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:

[We didn't expect] a modest but not trivial increase in discontinuations in Tec[fidera] in the United States [in particular].

(Id. ¶ 239).

         The market and analysts reacted negatively, and Biogen's stock price decreased $85, or 22 percent, on July 24. (Id. ¶¶ 237-45). 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 1.6 million shares. (Id.).

         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. ¶ 163). 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. ¶ 164). Twelve days later, the company announced that it would eliminate approximately 11 percent of its workforce. (Id. ¶ 165).

         D. Additional Statements During the Class Period

         Below are some of the alleged materially false misrepresentations and omissions that defendants made during the class period. The majority of the statements were previously addressed by this Court in Biogen I, and will not be duplicated here. However, plaintiffs in this suit have added nine purportedly false and misleading statements occurring on five dates between July 23, 2014, and April 24, 2015. Bolded text indicates emphasis added by plaintiffs. Additional text is provided for context.

         1. July 23, 2014--Kingsley and Scangos on Earnings Call

         The complaint alleges that Kingsley and Scangos made the following two false and misleading statements about Tecfidera's “safety profile” and “growth rate” during an earnings call on the first day of the class period, July 23, 2014.

Kingsley: T[ecfidera] in the U.S. continued on a solid trajectory. T[ecfidera] has been broadly used across numerous patient segments. Dually diagnosed, switches prompted by efficacy and non-efficacy reasons as well as patients returning to the market.
We believe T[ecfidera] is generally viewed by physicians and patients as efficacious with an attractive safety profile and a manageable tolerability profile. Importantly, patient retention rates have been similar to other marketed MS therapies and in line with our expectations.

. . . .
Scangos: Tecfidera continues to gain market share and we believe it's on track to become the leading MS therapy in the U.S.

(Compl. ¶ 166-67).

         The complaint alleges that Kingsley's statement regarding Tecfidera's “solid trajectory” and Scangos's statement that Tecfidera “continues to gain market share” were false and misleading because, among other things, physicians at the Shepherd Center had already stopped new prescriptions of the drug for its patients, creating a “domino effect” on other prescribers in the Atlanta area. (Id. ¶¶ 168-69).

         2. July 23, 2014--Q2 Press Release

         The complaint alleges that Biogen's July 23, 2014 press release touting its second-quarter financial performance included the following misleading statement:

Press Release: This past quarter highlighted significant accomplishments across our business, from the approval of Eloctate for hemophilia A, to the continued patient uptake of Tecfidera in the U.S. and new markets worldwide, to strong clinical results for important emerging MS treatments.

(Id. ¶ 170). The release also indicated that Biogen was increasing its “full year financial guidance . . . owing primarily to the growth of Tecfidera in the U.S. and E.U.” (Id. ¶ 171).

         The complaint alleges that the bolded statement was false and misleading because Biogen “knew that the Shepherd Center . . . had already begun taking patients off of Tecfidera.” (Id. ¶ 172). It further alleges that Biogen knew of this development, the risks to Tecfidera's safety profile, and that other neurologists were “changing their prescription patterns away from Tecfidera.” (Id.).

         3. September 11, 2014--Press Release

         On September 11, 2014, Biogen issued a press release that “continued to extol the safety profile of Tecfidera.” (Id. ¶ 176). Specifically, Biogen's Chief Medical Officer Alfred Sandrock (who is not a named defendant) was quoted:

Sandrock: Tecfidera continues to provide patients with effective oral treatment for MS that is supported by a growing body of data reinforcing its benefits and favorable safety profile.

(Id.). The complaint alleges that the statement was false and misleading because Dr. Thrower told Biogen executives in August 2014 that the drug was “compromising patients' immune systems in approximately 30 percent of the Shepherd Center's patients who were taking the drug.” (Id. ¶ 177).

         4. October 22, 2014--Kingsley on Earnings Call

         Biogen's third-quarter financial results were announced on October 22, 2014, and the company held an earnings call with defendants Scangos, Clancy, and Kingsley participating. (Id. ¶ 178). It was during this call that the PML death was announced for the first time. When the call was opened to questions from research analysts, the first question focused on Tecfidera's future growth rate. The complaint alleges that the following additional false and misleading statements were made.

Question: Maybe for Tony [Scangos] or Paul [Clancy] on 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.

(Id. ¶ 183; Def. Ex. 8 at 7-8). The complaint alleges that the bolded statements were false and misleading because physicians at the Shepherd Center had stopped prescribing Tecfidera in August 2014 and that there had been a “domino effect” on other prescribers. (Compl. ¶ 185).

         Additional stock analysts then asked various questions to the Biogen executives. In particular, one analyst asked about Tecfidera discontinuation rates:

Question: So we've done some of our own work on the discontinuation rate, and from at least from what docs are telling us, it looks like it's fairly flat and consistent with what define and confirm showed. Can you guys maybe talk about the trends you are seeing there? Are we ...

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