Kleinman v. Elan Corp.

Citation706 F.3d 145
Decision Date01 February 2013
Docket NumberDocket No. 11–3706–cv.
PartiesGary W. KLEINMAN, Individually and on behalf of all others similarly situated, Plaintiff–Appellant, v. ELAN CORPORATION, PLC, Pfizer, Inc., as Successor–In–Interest to Wyeth, Inc., G. Kelly Martin, Lars Ekman, Defendants–Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

OPINION TEXT STARTS HERE

Brian C. Kerr (David A.P. Brower, on the brief), Brower Piven, New York, NY, for PlaintiffAppellant Gary W. Kleinman.

Jaculin Aaron (Stuart J. Baskin, on the brief), Shearman & Sterling LLP, New York, NY, for Defendants–Appellees Elan Corporation, plc, G. Kelly Martin, and Lars Ekman.

John K. Villa (George A. Borden, David R. Riskin, on the brief), Williams & Connolly LLP, Washington, DC, for DefendantAppellee Pfizer, Inc.

Before: JACOBS, Chief Judge, KEARSE and HALL, Circuit Judges.

HALL, Circuit Judge:

PlaintiffAppellant Gary Kleinman (Kleinman) appeals from the judgment of the district court (Hellerstein, J.) dismissing Kleinman's amended complaint with prejudice for failure to state a cause of action under Fed.R.Civ.P. 12(b)(6) and denying leave to amend. Kleinman alleges that DefendantsAppellees Elan Corporation, plc (Elan), Pfizer, Inc. (Pfizer) (as successor-in-interest to Wyeth, Inc. (“Wyeth”)), G. Kelly Martin, and Lars Ekman (collectively, the Defendants) violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 by issuing a misleading press release on June 17, 2008 (the “June press release”) concerning the results of a clinical trial for a drug called bapineuzumab (then under joint development by Elan and Wyeth). Kleinman brought this putative class action on behalf of all those who purchased Elan's call options during the Class Period—June 17, 2008, to July 29, 2008. He alleges the press release omitted several facts that, in his view, were necessary to prevent the press release from being misleadingly optimistic. We write to explain how, in the context of the full presentation of the details surrounding the study of the drug, nothing omitted from the June press release rendered it false or misleading to a reasonable investor. Moreover, we hold that Kleinman offered insufficient additional allegations to cure this deficiency. For the reasons that follow, we affirm the judgment of the district court.

Background

We draw the following facts from Kleinman's amended complaint, written instruments attached to it, and statements or documents incorporated by reference. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002).

Elan is a neuroscience-based biotech company with operations in New York, California, and Pennsylvania. Elan's American Depositary Receipts (ADRs) are traded on the New York Stock Exchange and its publicly traded call options are derivative of, and trade in tandem with, Elan's ADRs. Wyeth was a Delaware Corporation before its acquisition by Pfizerin October 2009. During the relevant timeframe, Wyeth and Elan had a joint project aimed at researching, developing, and eventually marketing drugs designed to treat mild to moderate Alzheimer's.

Estimates show that more than five million Americans currently suffer from Alzheimer's, and that count is expected to grow as the population ages. The current panoply of drugs on the market treat only the symptoms of Alzheimer's—loss of cognition and function—and for only a short time. Elan and Wyeth developed bapineuzumab, which was designed to clear and prevent the toxic beta-amyloid plaques that build up in the brain. Some scientists believe these plaques are the main cause of the symptoms of the disease.

Before presentation of a new drug to the FDA, pharmaceutical companies are required to engage in three phases of clinical trials, with each phase growing in complexity and size, before ultimate presentation to the FDA.2 Phase 1 consists of a closely monitored, relatively small study (twenty to eighty volunteers) to determine the safety of the drug and, if possible, early evidence of effectiveness. See21 C.F.R. § 312.21(a). Phase 2 involves further clinical research and study to determine the drug's efficacy and any “common short-term side effects and risks associated with the drug.” Id. § 312.21(b). Finally, Phase 3 clinical trials “are performed after preliminary evidence suggesting effectiveness of the drug has been obtained” and usually include “several hundred to several thousand subjects.” Id. § 312.21(c).

After completing a successful Phase 1 trial for bapineuzumab, Wyeth and Elan designed the Phase 2 study to measure bapineuzumab's overall effectiveness and safety. That study consisted of a 240–patient, randomized, double-blind, placebo-controlled study.3 Patients enrolled in Phase 2 on a rolling basis, so although the trial began in April 2005, it was not complete until April 2008. Bapineuzumab's effectiveness was measured by common diagnostics that test cognition and dementia. The two primary tests were the ADAS–Cog 4 and the Disability Assessment Scale for Dementia (“DAD”). The Phase 2 trial, as planned, used a standard model with certain assumptions. Phase 2 also predesignated certain goals—endpoints—by which success would be measured based on how patients performed at the end of the study using the ADAS–Cog and DAD tests. Phase 2 included, as additional tests, changes in spinal fluid and brain volume. Patients' progress was also examined using the Neuropsychological Test Battery, the Clinical Dementia Rating Sum of Boxes, and the Mini–Mental State Examination (“MMSE”).

Having taken an interim look at the Phase 2 data in May 2007, Elan and Wyeth announced that they would commence Phase 3 for bapineuzumab later that year. The Phase 3 trials involve approximately 4,000 patients and include four randomized, double-blind studies across two subgroup populations.

In April 2008, Elan announced that while Phase 2 remained ongoing, it (along with Wyeth) expected to present a “top line finding some time around mid-year [2008] and a “full data review” of Phase 2 at the International Conference on Alzheimer's Disease (“ICAD”) in Chicago on July 29, 2008. In line with that plan, Wyeth and Elan jointly issued the June press release, informing the public of the top-line results for Phase 2 in advance of the ICAD. That press release forms the basis of this litigation.

The June press release stated that although [t]he study did not attain statistical significance on the primary efficacy endpoints in the overall study population[, p]ost-hoc analyses did show statistically significant and clinically meaningful benefits in important subgroups.” J.A. 237. The main headline of the June press release stated that Phase 2 resulted in “Encouraging Top-line Results.” Id. A subheadline also announced that “Primary Efficacy Endpoints In Overall Study Population [Were] Not Statistically Significant.” The positive results, the June press release stated, were seen in a subgroup of the Alzheimer's population: non-carriers of the Apolipoprotein (“ApoE4”) gene. Id. Specifically, with regard to

non-carriers of the [ApoE4] allele, estimated in the literature to be from 40 to 70 percent of the Alzheimer's disease population, posthoc analyses showed statistically significant and clinically meaningful benefits associated with bapineuzumab treatment on several key efficacy endpoints, including the Alzheimer's Disease Assessment Scale (ADAS-cog), the Neuropsychological Test Battery (NTB), the [MMSE] and the Clinical Dementia Rating—Sum of Boxes (CDR–SB). A favorable directional change was seen on the [DAD], although this was not statistically significant.

Id. Regarding ApoE4 carriers, the June press release noted that a post-hoc analysis similar to the one used for the non-carrier group yielded “no clinical benefits or statistically significant effects”; however, “favorable directional changes were observed on a number of endpoints.” Id.

With respect to the safety findings, the June press release stated that “adverse events were very common in both placebo and bapineuzumab-treated patients[,] with ApoE4 carriers experiencing more frequent adverse effects when taking bapineuzumab as compared to those taking the placebo. J.A. 237–38. “In addition, vasogenic edema 5 was reported in the treated population with an increased frequency in carriers and at higher doses.” J.A. 238. However, Wyeth and Elan “believe[d] that the overall safety findings from this Phase 2 trial support their prior decision to move to Phase 3 studies.” Id.

Commenting on the overall results, Defendant Kelly Martin, Elan's CEO, remarked in the press release that Elan and Wyeth were encouraged by the findings and that [t]hese results clinically support [their] decision to move into Phase 3.” Id. The press release noted that the “findings reflect preliminary analyses of the Phase 2 data,” and also that the Phase 2 trial had “imbalances in patient numbers and characteristics at baseline between subgroups studied that may or may not have affected” the results. Id. “Further analysis” was contemplated “in advance of a planned scientific presentation of detailed results of this study at the [ICAD] in Chicago, July 29, 2008.” Id. A disclaimer read that “these statements are subject to the risk that further analyses of the Phase 2 data may lead to different (including less favorable) interpretations of the data than the preliminary analyses conducted to date and/or may identify important implications of the Phase 2 data that are not reflected in these statements.” J.A. 239.

According to Kleinman's amended complaint, on the heels of the June press release, the price of Elan's ADRs rose from $27.11 to $30.00 in a single day. “By July 10, 2008, Elan ADRs were trading at over $36,” which was a nearly $9 increase in the price the ADRs traded at before the Class Period began on June 17, 2008. Am. Compl. ¶ 39.

Six weeks later, Elan and Wyeth presented the entire Phase 2 results at the ICAD as planned....

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