United States District Court, D. Massachusetts
MEMORANDUM & ORDER
Nathaniel M. Gorton United States District Judge.
case arises out of the development of a cancer drug by AVEO
Pharmaceuticals, Inc. (“AVEO”). The Securities
and Exchange Commission (“the SEC”) alleges that
AVEO, its chief executive officer Tuan Ha-Ngoc
(“Ha-Ngoc”), chief financial officer David
Johnston (“Johnston” or “defendant”)
and its chief medical officer William Slichenmyer
(“Slichenmyer”) made materially misleading
statements to investors about communications with the Food
and Drug Administration (“the FDA”) during their
bid for approval of their flagship drug candidate, tivozanib
(“Tivo”). The SEC contends that AVEO, through
Johnston, concealed from investors the critical fact that the
FDA recommended that AVEO conduct a second clinical trial in
order to secure approval for Tivo.
before the Court is Johnston's motion for summary
judgment (Docket No. 86). For the reasons that follow, that
motion will be denied.
FDA Approval Process
obtain FDA approval to market and sell a drug in the United
States, a pharmaceutical company must demonstrate the
drug's safety and efficacy through human clinical trials
conducted in three phases. After the third phase of the
trial, a company can seek approval from the FDA by submitting
a New Drug Application (“NDA”) which, if
accepted, leads either to a substantive review or a Refusal
to File (“RTF”) letter from the FDA. If the NDA
is accepted for filing, the FDA sends a letter (“the
Day 74 Letter”) which confirms certain logistics and
identifies any preliminary deficiencies in the application.
Upon receipt of the Day 74 Letter, an applicant has the
opportunity to respond to any concerns by amending the NDA.
the review process for cancer therapeutics, the FDA may
convene an advisory panel of outside experts called an
Oncologic Drugs Advisory Committee (“ODAC”). The
ODAC provides additional review of the safety and efficacy of
proposed drugs by holding non-binding votes on questions
posed by the FDA. Before ODAC meetings, the FDA and the
pharmaceutical company release the pre-meeting summaries for
those meetings. The FDA makes the final determination on the
NDA as to whether to approve the drug unconditionally,
approve the drug with certain conditions or deny approval.
a publicly-traded biopharmaceutical company that develops
oncology medicines, incorporated in Delaware with its
headquarters in Boston, Massachusetts. In 2012 and 2013,
Johnston was the chief financial officer (“CFO”)
of AVEO and, in that capacity, he was a member of AVEO's
Executive Committee, responsible for the company's
strategic decisions, and its Disclosure Committee.
AVEO's Form 10-K for fiscal years 2011 and 2012, the
company reported that it was developing a cancer therapy,
Tivo, which would be indicated for the treatment of renal
cell cancer. AVEO had begun sponsoring a Phase 3 drug trial
(“TIVO-1”) in 2009 to measure Tivo's efficacy
and safety against a control group that received sorafenib,
an approved therapy for renal cell cancer.
2012, representatives from AVEO and its business partner
Astellas Pharma, Inc. (“Astellas”) met with the
FDA in advance of submitting the NDA for Tivo (“the
pre-NDA meeting”). Prior to the meeting, AVEO sent the
FDA data derived from TIVO- 1, AVEO's only Phase III
trial. The data indicated that Tivo met its primary endpoint
but that the secondary endpoint, measuring overall survival
(the period of time a patient lives while taking the drug),
trended in a negative direction. The minutes of the pre-NDA
meeting indicate that the FDA voiced doubts about the
drug's safety and efficacy because of the TIVO-1
secondary endpoint results. The minutes note that
[t]he Agency expressed concern about the adverse trend in
overall survival. Further discussion of these findings will
be required at the time of filing and if the application is
filed they will be a review issue that could affect
approvability. FDA recommended that the sponsor conduct a
second adequately powered randomized trial in a population
comparable to that in the US.
member of the FDA staff suggested that the trend in the
secondary endpoint could cause the FDA to issue an RTF
the pre-NDA meeting, Johnston attended an AVEO Executive
Committee meeting and a board meeting to discuss the results
of the pre-NDA meeting and budgeting for a second Phase III
trial of Tivo (“TIVO-2”). Although AVEO sought a
meeting with the FDA to discuss TIVO-2's design and
timing, the company withdrew that request when the FDA
expressed “significant concerns regarding the trial
design described in [AVEO's] meeting package”.
Rather than pursuing the second trial, AVEO decided to submit
the NDA, relying on the results of TIVO-1. In August, 2012,
AVEO provided a regulatory update in a public press release,
[t]he FDA has expressed concern regarding the OS trend in the
TIVO-1 trial and has said that it will review these findings
at the time of the NDA filing.
the issuance of that press release, AVEO prepared a script
for a conversation with investors and analysts in which
Johnston participated. During that conversation, Dr.
Slichenmyer stated that he could not speculate as to what
additional action the FDA might require. AVEO filed its
quarterly Form 10-Q shortly thereafter which Johnston signed.
That form did not mention any recommendation of the FDA for a
second randomized trial. AVEO submitted another 10-Q in
November, 2012 with identical disclosure language.
November, 2012, the FDA accepted and filed the NDA which
initiated the process of substantive review. The FDA sent a
Day 74 letter in which it stated that the TIVO-1 results
remained a “significant safety concern” for the
agency that it intended to discuss at a May, 2013 meeting
with the ODAC convened to review Tivo.
January, 2013, AVEO filed an 8-K with the SEC. That 8-K did
not address the FDA's recommendation that the company
undertake a second trial or mention AVEO's plans to set
up TIVO-2. The next day, AVEO filed a prospectus in
anticipation of offering 6, 667, 000 shares of common stock,
priced at ...