United States District Court, D. Massachusetts
METZLER ASSET MANAGEMENT GMBH and ERSTE-SPARINVEST KAPITALANLAGEGESELLSCHAFT MBH, on Behalf of Themselves and All Other Similarly Situated Parties, Plaintiffs,
STUART “TONY” A. KINGSLEY, GEORGE A. SCANGOS, PAUL C. CLANCY, and BIOGEN, INC., Defendants.
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO
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.
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.
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.
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.
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.
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”).
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
amended complaint. Because the vast majority of the amended
complaint overlaps with the complaint in Biogen I,
this section will largely address new witnesses and
The Parties and Tecfidera
plaintiff Metzler Asset Management GmbH
(“Metzler”) is a German capital investment
company located in Frankfurt, Germany. (Compl. ¶
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).
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).
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.). 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).
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). 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).
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.).
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
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.
New Witness Allegations
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).
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. 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).
New Confidential Witnesses
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.
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). 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).
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
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
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
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).
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).
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.
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
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.
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.).
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.). CW 17 sold pharmaceutical
products for Biogen, including Tecfidera, and stated that his
sales dropped by at least 25% following the PML death.
New Allegations by Previously Identified Confidential
addition, plaintiffs offer additional supporting allegations
from four previously identified confidential witnesses. Their
new statements may be summarized as follows.
was a Biogen ABM responsible for parts of southern Florida
and Puerto Rico from November 2010 to June 2015.
(Id. ¶ 100). 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.).
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).
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).
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).
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.). 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).
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.). 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).
New Allegations by Dr. Thrower and Dr. Zamvil
addition to the new confidential witness allegations,
plaintiffs offer statements by two physicians in support of
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).
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).
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.
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.).
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). 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.
Overview of the Class Period Timeline
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. ¶
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).
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).
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).
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).
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).
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).
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.).
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).
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).
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
(Id. ¶ 239).
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.).
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
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).
Additional Statements During the Class Period
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.
July 23, 2014--Kingsley and Scangos on Earnings Call
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).
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. ¶¶
July 23, 2014--Q2 Press Release
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
(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).
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
September 11, 2014--Press Release
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
(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.
October 22, 2014--Kingsley on Earnings Call
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
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
Kingsley: Nothing big on a one time nature.
Inventories are moderating, I think a little bit in the
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.
stock analysts then asked various questions to the Biogen
executives. In particular, one analyst asked about Tecfidera
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