Opinion ID: 203426
Heading Depth: 3
Heading Rank: 1

Heading: PML Deaths and Other Opportunistic Infections

Text: Plaintiffs' initial complaints alleged that defendants knew of PML deaths from the SENTINEL combination therapy trial earlier than February 18, 2005 and failed to timely disclose the information. If plaintiffs have not abandoned this claim, it fails anyway. We agree with the district court that there is no evidence of record which makes this claim of knowledge before February 18, 2005 a permissible inference. Plaintiffs' primary theory advanced on appeal is that the defendants knew earlier of a series of opportunistic infections from use of TYSABRI including but not limited to PML, they failed to adequately disclose these risks, and they announced market projections they knew to be too optimistic in light of the risk of all opportunistic infections. [14] Plaintiffs allege the causal connection between TYSABRI's market share and a higher risk of all opportunistic infections was demonstrated by the market's reaction to the withdrawal of the drug from the market on February 28, 2005 and the limitations placed on TYSABRI when it was later reintroduced. The plaintiffs argue that TYSABRI was withdrawn not only because of the PML deaths but also because of the other opportunistic infections. The defendants respond that they meant what they said when, in the press release announcing the withdrawal of the drug, they specified that TYSABRI was being voluntarily withdrawn from the market because of the PML deaths. Again, we agree with the district court that no plausible inference can be drawn from the allegations and documents that the reason TYSABRI was withdrawn was something other than the PML deaths. That analysis does not itself end any claim by plaintiffs of securities fraud. It may still be true that a reduction in the market for TYSABRI based on the risk of opportunistic infections other than PML would have an effect on Biogen's share prices. But even then, defendants cannot have committed fraud if they did not know at the time that the failure to provide additional information was misleading. See ACA Fin., 512 F.3d at 62 (There is nothing in the amended complaint to establish that the defendants were aware of facts, at the time they made their predictions, that would have made those predictions unreasonable....); Boston Scientific, 523 F.3d at 86 (Securities actions raise questions of what corporate managers knew and when they knew it.  (emphasis added)). Plaintiffs' amended complaint fails to allege facts both (1) as to when defendants had information about non-PML opportunistic infections and (2) that the information available sufficiently suggested a causal relationship between TYSABRI and non-PML opportunistic infections. The plaintiffs rely heavily on the information disclosed in the initial November 2004 approval of the drug, on the hearings held by the FDA Advisory Committee on March 7-8, 2006, and on the black-box warning labels the FDA required when TYSABRI was reintroduced on June 5, 2006 for a more limited market. They also rely on some other evidence, including confidential source allegations. We must take it as true from plaintiffs' allegations that one of the potential risks of TYSABRI, given its mechanism of action, was the risk of resulting opportunistic infections. The FDA said as much in its November 2004 medical review recommending the drug for accelerated approval. Joint App'x at 448 ([G]iven the mechanism of action of natalizumab, this [opportunistic infections] issue deserves continued scrutiny ... to more fully characterize the effect of natalizumab on the immune system.). This risk was one reason for the continued scrutiny of the drug which did occur, during the remaining two years of trials and in examining post-marketing experiences. Plaintiffs claim that the FDA gave its approval only because defendants hid data from it about opportunistic infections. This is a very serious charge and is not substantiated by the allegations in the complaint or the documents in the record. The FDA's accelerated approval was granted in November 2004. Plaintiffs allege defendants were aware by February 2004 of all incidents of death and innumerable opportunistic infections that occurred during [prior] trials. [15] Pls.' Br. at 10. Biogen submitted its application to the FDA on May 25, 2004 and, on June 28, 2004, announced the FDA had designated TYSABRI for priority review. During the review process the FDA evaluated safety data primarily from the Phase III MS clinical trials and considered data from the ongoing Crohn's disease studies. The cut-off dates for data reviewed ranged from March 1 to April 30, 2004. We thus take April 30, 2004 as a cut-off date for information that the FDA would have known. If the FDA were misled, as plaintiffs assert, it was with respect to pre-April 30, 2004 data. There is no evidence which permits any inference the defendants intentionally failed to disclose relevant data to the FDA between April 30, 2004 and when the FDA gave approval on November 23, 2004, or from the approval date to the withdrawal of the drug on February 28, 2005. The plaintiffs' claim that Biogen hid data from the FDA is not based on any FDA finding that this was true. Rather, it is based primarily on plaintiffs' reading of after-the-fact statements about earlier events made (a) by a Biogen employee at the post-withdrawal Advisory Committee hearings, (b) by an FDA employee at the same hearings, and (c) by confidential sources. The Biogen employee, Dr. Michael Panzara, presented data at the hearings from both the MS and the Crohn's disease trials. In total, 3,900 patients received TYSABRI in both sets of trials. In the MS trials, a total of three patients developed opportunistic infections, including the two who developed PML. During the Crohn's disease trials, five patients were diagnosed as having suffered from opportunistic infections, including one patient who had been diagnosed with PML. This results in an incidence rate of 0.2%, including the PML infections. If the PML were excluded, the incidence rate would be even lower. There is no basis to conclude that these results, excluding the PML infections, were statistically significant. There is no plausible inference from the reports of just five patients with non-PML opportunistic infections that the defendants knew of any causal relationship between the use of TYSABRI and the separate opportunistic infections diagnosed for the five patients, and then intentionally withheld data. [T]he receipt of an adverse report does not in and of itself show a causal relationship between [a drug] and the illness mentioned in the report. In re Carter-Wallace, Inc. Sec. Litig. ( Carter-Wallace II ), 220 F.3d 36, 41 (2d Cir.2000). Some adverse events may be expected to occur randomly, especially with a drug designed to treat people that are already ill. Id. Plaintiffs also cite the testimony of the FDA's Dr. Alice Hughes at the post-withdrawal Advisory Committee hearings, who stated that there were seventeen deaths during the clinical trials, thirteen of which involved patients taking TYSABRI. But plaintiffs allege that only four of those were a result of an opportunistic infection (two being PML), and have not pled there was any causal significance evident from the data. Moreover, there is contrary evidence. During these same hearings, the FDA's Deputy Director of Neurology Products, Dr. Marc Walton, stated: We were not impressed that the overall mortality rate was markedly different than we might expect in MS studies. And before the drug was approved, the FDA's Deputy Director of the Office of Drug Evaluation, Dr. David Ross, wrote to his superior that the deaths to date in the clinical studies d[id] not represent a clear safety signal. Further, the plaintiffs also have failed to allege when the information on the non-fatal opportunistic infections became known. Many of the infections occurred in the Crohn's disease trials, but at least three of these trials were ongoing after January 29, 2004, and so the infections may have occurred or become known after the relevant time periods. Plaintiffs advance the proposition that the fact that even one opportunistic infection occurred is significant enough to put TYSABRI's safety and marketability in question. Pls.' Br. at 30 n. 16. In the absence of an allegation or inference of proof of any statistical significance of the occurrence of one or more non-PML opportunistic infections, the statement is simply not true and is also incorrect as a matter of law. Indeed, there are no allegations by plaintiffs that defendants knew of a significant risk of non-PML opportunistic infections while the FDA was reviewing TYSABRI. No strong inference can be drawn that defendants knowingly or recklessly withheld material information from the FDA in order to get fast-track review and accelerated approval. Nor do any statements by FDA officials support such an inference. Plaintiffs argue that the November 23, 2004 memo from the FDA's Dr. David Ross, discussed above, which recommended the approval of TYSABRI, establishes that Biogen withheld data. Dr. Ross stated: The events reported do not appear to represent infections due to opportunistic pathogens.... It is not plausible to read this as evidence of wrongdoing by Biogen; plaintiffs have not even presented a viable theory that the statement means that data was withheld, as opposed to what it says. [16] This leaves only the allegations based on confidential sources. Our standard for evaluating whether confidential source material is sufficient under the PSLRA is as follows: [W]here plaintiffs rely on confidential personal sources but also on other facts, they need not name their sources as long as the latter facts provide an adequate basis for believing that the defendants' statements were false. Moreover, even if personal sources must be identified, there is no requirement that they be named, provided they are described in the complaint with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged. In both of these situations, the plaintiffs will have pleaded enough facts to support their belief, even though some arguably relevant facts have been left out. Cabletron, 311 F.3d at 29 (quoting Novak v. Kasaks, 216 F.3d 300, 314 (2d Cir.2000)) (block quotation). Consequently, we look at all of the facts alleged to see if they `provide an adequate basis for believing that the defendants' statements were false.' Id. (quoting Novak, 216 F.3d at 314). This involves an evaluation, inter alia, of the level of detail provided by the confidential sources, the corroborative nature of the other facts alleged (including from other sources), the coherence and plausibility of the allegations, the number of sources, the reliability of the sources, and similar indicia. Id. at 29-30. Defendants argue that Tellabs requires us to revise our law on confidential sources, but we believe our law on this point is unchanged. They cite to the Seventh Circuit's decision in Higginbotham, 495 F.3d at 756 (because of Tellabs, court must discount confidential source allegations). But plaintiffs overstate their position, even as to Seventh Circuit law. See Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702, 712 (7th Cir.2008) (finding confidential source allegations sufficient where they are numerous and consist of persons who from the description of their jobs were in a position to know at first hand the facts to which they are prepared to testify); id. ([T]he absence of proper names does not invalidate the drawing of a strong inference from informants' assertions.). Tellabs requires that all information in plaintiffs' complaint be evaluated. 127 S.Ct. at 2509. We think that includes confidential source information, subject to the restrictions stated in our case law. We have never said a complaint would survive if it were based only on confidential source allegations. Indeed, we have said there must be a hard look at such allegations to evaluate their worth. See Cabletron, 311 F.3d at 30 ([C]ourts can competently make a careful evaluation of securities fraud pleadings based on anonymous sources, and separate frivolous complaints from those with potential merit.). Scienter involves wrongdoing by high-level company officials; low-level employees or consultants may well know of the wrongdoing and wish to disclose it but fear retaliation if their names appear among the accusers. Legislatures, both federal and state, have recognized similar fears in enacting anti-retaliation statutes and in encouraging whistle-blowers. Some allowance at the motion to dismiss stage for consideration of confidential sources in litigation is consistent with those policies. See id. (Employees or others in possession of important information about corporate malfeasance may be discouraged from stepping forward if they must be identified at the earliest stage of a lawsuit.); Novak, 216 F.3d at 314 (Imposing a general requirement of disclosure of confidential sources ... could deter informants from providing critical information to investigators in meritorious cases or invite retaliation against them.). Before discovery, a confidential source would wish to remain unnamed, as a suit might never be brought or if brought might be settled before any discovery [i]s conducted. Makor Issues & Rights, 513 F.3d at 711. We decline to adopt a rule which would exclude confidential source allegations which have every indication both that the source had access to information and that the information has the earmarks of credibility, simply because the identity of the source is not initially revealed. [17] And we see no reason to exclude consideration of such information from the evaluation of whether plaintiffs' strong inferences of scienter are at least as plausible as defendants' inferences. Here, however, the allegations made by the confidential sources, even if we assume them to be true, still do not create a strong inference of scienter. Plaintiffs allege that one confidential source, CS 3, a neurologist who was involved in the clinical trials for MS, confirmed the existence of several serious opportunistic infections during the MS and Crohn's disease trials, and the source specifically cited one opportunistic infection that occurred during the MS trials and two from the Crohn's disease trials. CAC 144. However, this allegation does not indicate when during the trials these infections became known. Moreover, the allegation does not contribute anything additional to plaintiffs' case. Dr. Panzara said during the FDA hearings that three patients in the MS trials and five patients in the Crohn's disease trials developed opportunistic diseases, and Dr. Hughes stated that there were two deaths during the clinical trials attributable to non-PML opportunistic diseases. We discussed earlier the shortcomings of these allegations in establishing the requisite scienter. Nothing is added by the existence of a confidential source who states that there were several opportunistic infections during the trials and cites three. [18] Similarly, nothing is added by the allegation, even if true, that another confidential source, CS 4, was aware of serious opportunistic infections during the Crohn's disease trials. CAC 145. Plaintiffs also point to statements by two other confidential sources. CS 5, a neurologist involved with the SENTINEL Phase II trial, stated that five participants in the Crohn's disease trials developed cancer, as opposed to one patient in the placebo group, and he was concerned about the types of cancer the patients had contracted, which included malignant melanoma and cervical cancer. CAC 147. Again, there is no indication as to when during the trials these occurrences became known. Regardless, assuming it to be true, the allegation that five people developed cancer in clinical trials involving hundreds of people does not itself support a plausible inference that defendants knew that TYSABRI increased the risk of patients developing cancer, let alone an inference that TYSABRI increased the risk of opportunistic infections, which are distinct from cancer. Finally, CS 6, a data entry clerk who worked for Biogen from May to December of 2004, alleged that the number of adverse events being reported to the company concerning TYSABRI was on average between fifty and sixty per day; that in June 2004 and just prior to TYSABRI's approval in November 2004, this volume was extremely high, particularly when compared to other clinical trials in which this confidential source was involved; and that many of these adverse reports were serious, such as an increase in the size of tumors and complaints suggesting symptoms of PML. CAC 148-149. With the exception of this last assertion, these allegations say nothing about the nature of the adverse event reports and therefore, even if true, cannot support an inference that it was known that TYSABRI causes opportunistic infections. As for the claim that there were a number of serious adverse event reports, even assuming this to be true, the source provides no information regarding whether these reports were confirmed, whether the symptoms being reported were shown to have any connections to opportunistic infections, or even whether any connections were made between the symptoms being reported and a patient's use of TYSABRI. [19] Again, the receipt of an adverse report does not in and of itself show a causal relationship between [a drug] and the illness mentioned in the report. Carter-Wallace II, 220 F.3d at 41. Plaintiffs' claims as to non-PML opportunistic infections fail to meet the scienter standards of the PSLRA.