In re Medimmune, Inc. Securities Litigation, PJM 93-3980.

Citation873 F. Supp. 953
Decision Date10 January 1995
Docket NumberNo. PJM 93-3980.,PJM 93-3980.
PartiesIn re MEDIMMUNE, INC. SECURITIES LITIGATION.
CourtU.S. District Court — District of Maryland

COPYRIGHT MATERIAL OMITTED

Sherrie R. Savett, Berger & Montague, P.C., Philadelphia, PA, for plaintiff.

Harvey Kurzweil, Dewey Ballantine, New York City, for defendant.

OPINION

MESSITTE, District Judge.

I.

Plaintiffs, who seek to represent a class of persons purchasing common stock of Defendant MedImmune, Inc. between January 4 and December 2, 1993, have sued the corporation and various of its officers, alleging violations of federal securities law, common law fraud, and negligent misrepresentation. Defendants have filed a Motion to Dismiss for failure to state a claim under Fed.R.Civ. Proc. 12(b)(6) and failure to plead fraud with particularity as required by Rule 9(b). The Court has determined to grant the Motion, except with regard to:

(1) Defendant Mott's statement of April 27, 1993 that "there's absolutely no question about efficacy (of the drug Respivir)";

(2) Defendant Hockmeyer's statement of September 1, 1993 of the reasons why the U.S. Food and Drug Administration (FDA) postponed its review of the product licensing application for Respivir;

(3) Hockmeyer's alleged statement on September 8, 1993 regarding the reasons for the delay of review of the drug by the FDA;

(4) Defendant MedImmune's press release of November 17, 1993, insofar as it endorsed the New England Journal of Medicine article on the Respivir study, specifically the assertion in the article that the study was conducted on an "intention to treat" basis; and

(5) The New England Journal of Medicine article of November 18, 1993, as co-authored by Defendant Top and endorsed by MedImmune, specifically insofar as the article reported that the study of Respivir had been conducted on an "intention to treat" basis.

The Motion to Dismiss will be granted as to all other statements and as to all Defendants except those expressly making or endorsing one of the above-referenced statements, i.e., except as to Defendants MedImmune, Hockmeyer, Mott and Top.

II.

Defendant MedImmune, a Delaware corporation based in Gaithersburg, Maryland, researches, develops, manufactures and markets therapeutics and vaccines for the treatment and prevention of certain infectious diseases. The company's common stock is listed and traded on the National Market System. The company has only one product approved for sale by the U.S. Food and Drug Administration (FDA), namely CytoGam, a polyclonal antibody product for the prevention of disease in kidney transplant patients. A second product known as Respivir (or Respigam or RSVIG), was at all relevant times under review for marketing approval by the FDA. The present lawsuit concerns Respivir.

Respivir, a blood plasma derivative, is a polyclonal antibody product used intravenously for the prevention of respiratory syncytial virus (RSV). RSV is the leading cause of pneumonia and bronchiolitis or lower respiratory infection (LRI) in infants, primarily children less than 2 years of age. According to an April 27, 1994 press release of MedImmune, more than 90,000 hospitalizations and 4,500 deaths occur each year in the United States as a result of RSV infection in children. As of December 1992, when MedImmune filed a product license application (PLA) seeking marketing approval for Respivir from the FDA,1 no other product was licensed for the prevention of RSV disease in the United States.

With the filing of the PLA, MedImmune's financial prospects began to soar. On July 14, 1993, MedImmune announced that it had signed a letter of intent with American Cyanamid Company to form an alliance in the United States for the development and marketing of three generations of products for RSV (as well as for the marketing of a new product developed by Cyanamid). On August 13, 1993, MedImmune announced a $21 million private placement of newly issued common stock with a number of institutional investors. According to the announcement, MedImmune intended to use the net proceeds from the placement for, among other things, operating expenses and investments in inventory and receivables associated with preparing for and launching Respivir. On September 14, 1993, MedImmune announced that it had signed a letter of intent to acquire Melville Biologics, a developer of blood derivative products, for $40 million in newly issued shares of MedImmune, an acquisition which, according to MedImmune, would provide additional manufacturing capacity for Respivir. On November 9, 1993, the company reported improved third quarter results and publicized that it had signed a definitive agreement with Cyanamid to form the previously publicized alliance.

On December 2, 1993, the bottom fell out of the market for MedImmune stock.2 On that date, the Blood Products Advisory Committee of the FDA held its hearing on the PLA for Respivir and, citing various flaws in the study design, voted 11 to 0 against recommending approval of the drug by the FDA.

At the hearing various presenters came forth to make the case that Respivir was safe and effective.3 The presenters included Dr. George Siber, Director of the Massachusetts Public Health Biological Laboratories, Associate Professor of Medicine at Harvard University and consulting physician in infectious diseases at the Dana-Farber Cancer Institute and Children's Hospital in Boston; Dr. Jessie Groothuis of the University of Colorado Children's Medical Center; and Defendant Top, who was identified to the panel by Dr. Siber as a pediatric infectious disease specialist with special interest in respiratory viral infections and one who, prior to joining MedImmune, had been Director of the Walter Reed Army Institute of Research.

Dr. Siber told the Committee of the development of Respivir and described studies relative to the preparation of the drug. Dr. Groothuis described the multi-center double blind evaluation of Respivir in preventing RSV infections as reported in an article published just a few weeks before in the New England Journal of Medicine; and Dr. Top discussed the safety of Respivir in high risk children. Dr. Siber stressed the "truly ... collaborative effort" that characterized the development and evaluation of Respivir.

He concluded the presentation to the Advisory Committee by summarizing several main points:

First ..., RSV is the single most common cause of respiratory infection in children. This virus causes particularly severe illness, with substantial morbidity, in high risk children with prematurity and chronic lung disease. About one in 4 high risk infants develop RSV LRI (lower respiratory infection) in any given season.
Second, there is currently no effective preventive measure available for RSV. RSVIG (Respivir) thus offers a unique therapeutic modality. RSVIG is a wellcharacterized immune globulin which is selectively enriched, about five to ten-fold, in RSV neutralizing activity.
Further, RSVIG ... is safe in infants with prematurity and chronic pulmonary disease.
Finally, RSVIG clearly prevented severe disease, not only as measured by an objective scoring system, but also by more practical real life measures, such as hospitalization with RSV infection and ICU admission with RSV infection.

Dr. Siber closed on the following note:

I'd like to conclude by thanking our colleagues at FDA for their extraordinary efforts in reviewing our PLA submissions in a thorough and timely manner so that this meeting could be scheduled at this time, just before the onset of the RSV season.
If the product is promptly approved, we believe that we can make it available to a substantial number of high risk children during this season and then fully introduce the product before the onset of the next season.

In the question and answer period that followed, however, Advisory Committee members expressed concern that inadvertent bias in the study design might have undermined the reliability of the data. For instance, although FDA staffers agreed that the deaths of 6 of the 249 children participating in the study were not statistically significant and that there was no evidence linking the deaths to the drug, Committee members favored further study to determine the extent to which treatment with the drug may have contributed to the deaths. At least a few members, however, stated unequivocally that they believed the data indicated the deaths were not related in any way to the treatments.4

At the December 1993 meeting, Advisory Committee members also expressed concern about the concentration of treatment response at the Denver site, as well as the enrollment procedure used there, which they believed might have compromised random assignment of trial participants to treatment groups. Specifically, the nurse coordinator who enrolled the children in the study at the Denver site was said to have known the patient histories and interim results of the trial and therefore was not blinded to the test participants. While there was no evidence of purposeful assignment by the nurse coordinator in Denver, inadequate randomization and blinding at that site apparently gave the Committee pause because the incidence of RSV LRI and evidence of a treatment effect were in fact considerably higher at Denver than at the other four test sites and thus may have driven the overall study results. Some Committee members, however, acknowledged that possible explanations for the more significant results at the Denver site might have been Denver's high altitude or other local environmental factors as opposed to selection bias.5

Finally, Advisory Committee members expressed concern about the lack of follow-up data for 17 patients who had dropped out of the trial, on the grounds that, without knowing if any of the dropouts had contracted RSV LRI, the statistical significance of the 17 dropouts could not be properly measured.6

The day following the Advisory Committee vote Biocentury ...

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