Opinion ID: 2777754
Heading Depth: 3
Heading Rank: 3

Heading: The Protect II and Recover II Studies

Text: In August 2007, Abiomed received an IDE from the FDA that allowed it to begin a clinical trial comparing the performance of -6- the Impella 2.5 to that of the IABP during high-risk percutaneous coronary interventions (PCIs), commonly known as angioplasties (the Protect II Study). The study's purpose was to measure major adverse events suffered by patients 30 days after the PCI procedure. On December 6, 2010, Abiomed terminated the Protect II Study after finding that the Impella 2.5 did not achieve superior outcomes compared with the IABP at the 30-day endpoint. However, Abiomed continued to collect and analyze data from the study, and the study eventually yielded exploratory results suggesting a possible benefit for the device at 90 days. The study was published in September 2012 in Circulation, a peer-reviewed medical journal. In March 2008, Abiomed received an IDE for a second study (the Recover II Study) designed to compare the Impella 2.5 to the IABP in hemodynamically unstable patients undergoing a PCI due to an acute myocardial infarction (AMI), more commonly known as a heart attack. The Recover II Study was suspended in September 2009 and eventually terminated due to insufficient enrollment. D. 510(k) Clearance for the Impella 2.5, the Alleged Pervasive Scheme of Off-Label Marketing, and the FDA's Response In June 2008, pursuant to the 510(k) process, Abiomed received clearance from the FDA to market and commercially distribute the Impella 2.5 for partial circulatory support for up -7- to six hours. Under FDA regulations, to repeat, Abiomed was not permitted to market or promote the Impella 2.5 for any other use. Plaintiffs allege that defendants flouted these regulations and engage[d] in widespread improper promotion and marketing of the Impella 2.5. They make the following specific allegations in support of that claim.
On January 28, 2010, the FDA sent Abiomed an Untitled Letter objecting to certain of Abiomed's activities promoting the Impella 2.5. Untitled Letters are intended to address alleged regulatory violations that do not meet the threshold for regulatory significance warranting a Warning Letter. They do[] not include a warning that a company's failure to take prompt corrective steps could lead to an enforcement action. Simon, 2014 WL 1413638, at  n.2 (citing U.S. Food & Drug Admin., Regulatory Procedures Manual: Advisory Actions, 2004 WL 3363386, at  (2010)). The FDA stated that Abiomed had improperly promot[ed] the Impella 2.5 for high risk PCI and AMI and represented that the Impella 2.5 was superior to the IABP in those uses. Essentially, in the FDA's view, Abiomed's promotional materials represented that the device was effective for uses for which it was being tested under the Protect II and Recover II IDEs, which constituted a violation of FDA regulations. -8- Abiomed responded to the FDA letter on March 4, 2010, stating that it now recognize[d] that the challenged promotions had made improper efficacy claims and that it would revise its marketing materials in order to remove the offending statements. Abiomed also represented that it had strengthened its review process for promotional materials. The FDA viewed this response as inadequate, however, and Abiomed made further changes to its advertisements and reviewed its marketing materials and website to ensure that there were no other materials beyond those identified by the FDA that made improper safety or efficacy claims. On April 20, 2010, the FDA wrote Abiomed stating that its response appear[ed] adequate and that no further action was necessary. Abiomed did not publicly disclose this correspondence with the FDA at that time.
Over a year later, on June 10, 2011, the FDA issued an official Warning Letter to Abiomed stating that the company's marketing materials continued to improperly compare the Impella 2.5 to the IABP and promote the device for non-cleared uses. A Warning Letter is a step above an Untitled Letter in the FDA's enforcement hierarchy. It communicates that the FDA believes the regulated entity has committed a violation of regulatory significance but does not commit the FDA to taking enforcement action. Simon, 2014 WL 1413638, at  n.2 (citing U.S. Food & Drug -9- Admin., Regulatory Procedures Manual: Advisory Actions, 2004 WL 3363386, at -2 (2010)). The Warning Letter criticized an Abiomed magazine advertisement that pictured a hand puncturing a red balloon and suggested that the Impella 2.5 was superior to the IABP for circulatory support in the Cath lab. The FDA's letter also complained about the Abiomed slogan, Recovering Hearts, Saving Lives, which the FDA stated would require a study under an IDE to evaluate whether the device could salvage heart tissue and muscle.3 Finally, the agency took issue with a claim at a conference of cardiovascular physicians that the Impella could improve hemodynamics and cardiac output in AMI Shock patients, since those indications also needed to be supported with a study performed under an IDE. The Warning Letter was posted on the FDA's website. An Abiomed spokeswoman stated publicly that the letter addresses specific promotional items from 2010. . . . We are working with the FDA to ensure all of our promotional materials comply with the agency moving forward. According to CW1, however, Abiomed senior management did not take the warning letter seriously and trivialized the FDA concerns. CW2, a senior quality compliance 3 The FDA subsequently revised its position on the slogan, stat[ing] that [it] had decided to leave the tagline issue alone and asking only that the company not claim that the Impella 2.5 could Recover Heart Muscle. -10- and validation engineer at Abiomed from April 2008 through March 2011, likewise said that Abiomed 'didn't change anything' after being notified by the FDA. In July 2011, at Abiomed's request, the FDA held a clarification call with Abiomed to discuss the Warning Letter. The FDA reminded Abiomed of the Impella 2.5's very limited clearance and told them to refrain from comparing the device to the IABP. One agency member noted that Abiomed should have had some awareness of the issues given the January 2010 Untitled Letter. In August 2011, Abiomed sent a formal response letter to the FDA discussing the actions it had taken to address the FDA's concerns. The company stated that it would not run the balloon advertisement again and would ensure that the advertisement did not exist on Abiomed's website, and that it had removed materials related to the cardiovascular conference from the website. The letter also stated that Abiomed would put into place a plan to prevent future violations. Abiomed did not receive any follow-up correspondence from the FDA for several months.
Plaintiffs allege that, even in the wake of the June 2011 Warning Letter, Abiomed continued to engage[] in pervasive off-label marketing of the Impella 2.5 beyond its FDA cleared indications. For example, during a February 2012 episode of the CNBC program Mad Money, Minogue suggested that the Impella 2.5 -11- could be used in patients experiencing heart attacks, and he held up an IABP and an Impella 2.5 side by side and stated that the latter was cost effective. Also, Abiomed made repeated claims in SEC filings and conference calls regarding the efficacy of the Impella 2.5 based on the results of the Protect II Study. Plaintiffs also allege that Abiomed trained its sales and clinical staff to compare the Impella 2.5 to the IABP and to prompt and steer physicians to ask about off-label uses of the Impella 2.5. CW1 and CW5, a clinical representative at Abiomed from February 2012 until February 2013, said they were provided with talking points about the Protect II Study and encouraged to discuss the superiority of the Impella 2.5 over the IABP. CW2 stated that Abiomed senior management knew Abiomed did not have the clinical studies to support the claims they were making. CW3, an account manager at Abiomed from September 2008 until the end of March 2011, relayed similar concerns to senior management and was blown off. CW7, a director of clinical operations for Abiomed . . . from February 2009 until November 2011, stated that Abiomed promoted the Impella 2.5 for use in procedures that take longer than six hours. CW4, a clinical representative in cardiology at Abiomed . . . from August 2007 until September 2010, -12- stated that Abiomed help[ed] doctors identify candidates to use the Impella 2.5 on, including high-risk PCI patients.4 On February 24, 2012, Abiomed and the FDA had a meeting, in part to discuss Abiomed's improper marketing practices. Plaintiffs allege that Abiomed never disclosed the true purpose of this meeting, instead stating in a later filing with the SEC that the meeting was held to present the final results of the Protect II Study and to discuss other unrelated matters.
In April 2012, the FDA sent another letter to Abiomed asserting that its promotional materials were still improperly marketing the Impella 2.5. The FDA noted that the AbiomedImpella YouTube channel included several videos discussing unapproved uses of the Impella 2.5, and that the company's website contained a link to Patient Stories describing unapproved uses of the device. The agency also objected to Minogue's statements on the Mad Money episode. The letter stated that these examples represent[ed] a fraction of the objectionable claims regarding the Impella, and the agency threatened enforcement action absent prompt and effective corrections. 4 Plaintiffs include these allegations in the section of the complaint detailing Abiomed's allegedly improper marketing after the Warning Letter was issued, but they do not provide any indication of the specific time period to which the confidential witnesses' observations correspond. -13- Abiomed disclosed this FDA letter in its 2012 10-K, filed with the SEC on June 4, 2012. The company announced that it had received a follow up letter from the FDA stating that some of our promotional materials continued to market the Impella 2.5 in ways that are not compliant with FDA regulations and that it was cooperating with the FDA in addressing its concerns.
Subsequent Compliance Audits On August 7, 2012, the FDA and Abiomed met again, again at Abiomed's request. [T]he primary objective of the meeting was to present Abiomed's actions to close-out the Warning Letter and maintain compliance and then have a discussion as to whether Abiomed was meeting FDA requirements. After Abiomed detailed the measures it was taking to ensure compliance with the regulations, an FDA representative suggested that Abiomed 'take a step back' because [h]e saw the corrective actions as too targeted, and not addressing the whole labeling program. Another representative commented that the FDA did not think of the clearances of the product in the same way Abiomed does. The FDA was frustrated because it felt that regulatory violations were happen[ing] repeatedly. Minogue responded that Abiomed had to comply, and will comply, but that, because Abiomed was such a small company, it was critical to market the device. An FDA representative opined that it would involve 'walking a fine line' to stay in compliance while marketing. The meeting closed with the FDA -14- admonishing Abiomed that it took the matter very seriously, that a Warning Letter is the last communication given, [and] that Abiomed needed to do a systemic review of its procedures in order to give the [agency] a systemic response for compliance. In the late summer of 2012, the FDA conducted a compliance audit of Abiomed, and Abiomed simultaneously conducted its own internal audit. After those audits, Abiomed pulled its marketing and training materials for compliance reasons and did not put up replacement materials for several months. The replacement materials, according to CW5, were extremely limited compared to what they had previously -- for example, they no longer included slides about the Protect II Study. Abiomed confirmed in a letter to the FDA dated August 20, 2012, that it understood its prior approach to compliance was too narrow in focus and so was adopting a broad, systemic approach to address the issues raised by FDA. This approach included destroy[ing] the Impella marketing brochures cited by FDA, stopp[ing] distribution of all marketing labeling, recall[ing] all marketing labeling held by Abiomed field personnel, and stopp[ing] any planned updates to all labeling and the [Abiomed] website.
On November 1, 2012, Abiomed disclosed that the U.S. Attorney's Office for the District of Columbia had begun an investigation into its marketing and promotional practices -15- regarding the Impella 2.5. Abiomed also maintained its Impella revenue guidance at approximately 30% for the fiscal year, despite 45% growth through the first half of the year, implying a marked slowdown during the second half of the year . . . . Minogue disclosed the FDA's compliance audit in a conference call conducted the same day and stated that Abiomed ha[d] taken extensive actions to correct [its] noted compliance issues identified in [its] annual report. Abiomed's stock price fell from $19.82 per share to $13.61 per share on November 1, a drop of approximately 32%.
On February 19, 2013, the FDA issued a Close-Out Letter to Abiomed stating that the agency had completed its evaluation of Abiomed's corrective actions taken in response to the Warning Letter and had determined that Abiomed had adequately addressed those violations. Abiomed's stock price recovered from the November 2012 fall. As of May 20, 2013, the stock was trading at $23.11 per share. E. Defendants' Allegedly False and Misleading Statements Plaintiffs allege that, between August 4, 2011, and October 31, 2012, defendants made specific false and misleading statements that deceived the investing public and caused the plaintiffs to purchase Abiomed stock at artificially inflated prices. These statements fall into three principal categories. -16- First, plaintiffs allege that several of defendants' statements about the growth of Impella product revenues were false and misleading because Abiomed failed to disclose that the reported revenue growth was substantially the result of off-label marketing. Defendants either provided no explanation for the growth or attributed the revenues to sources such as increased Impella 2.5 utilization in the cath lab. Plaintiffs allege these statements were misleading because they failed to disclose that Abiomed's continued revenue . . . was at risk should the Company be forced to discontinue [its marketing] practices. Defendants allegedly made these statements in an August 2011 press release and conference call announcing Abiomed's first quarter 2012 (Q1 2012) earnings; in Abiomed's Q1 2012 10-Q; in a November 2011 press release and conference call announcing Abiomed's Q2 2012 earnings; in Abiomed's Q2 2012 10-Q; in a February 2012 press release and conference call announcing Abiomed's Q3 2012 earnings; in Abiomed's Q3 2012 10-Q; in a May 2012 press release and conference call announcing Abiomed's Q4 2012 earnings; in Abiomed's 2012 Form 10-K; and in an August 2012 press release and conference call announcing Abiomed's Q1 2013 earnings. Second, defendants allegedly continued to compare the Impella 2.5 to the IABP based on the results of the Protect II Study, even though FDA regulations prohibited Abiomed from doing so. For example, plaintiffs cite Minogue's statements in an August -17- 2011 conference call that, according to the study, Impella patients had significantly better outcomes at 90 days relative to IABP patients. Defendants allegedly made similar statements in Abiomed's Q1 2012 10-Q; in Abiomed's Q2 2012 10-Q; in a February 2012 press release and conference call concerning Abiomed's Q3 2012 results; on the February 7, 2012, episode of Mad Money; in Abiomed's 2012 Form 10-K; and in an August 2012 conference call. Plaintiffs also allege that Abiomed's May 2012 disclosure of the February 24, 2012, meeting with the FDA was false and misleading because it failed to disclose that the purpose of the meeting was to discuss Abiomed's improper marketing of the Impella 2.5 . . . and the FDA's safety concerns with the device related to the Protect II Study. Third, plaintiffs allege that many of defendants' statements concerning the regulatory back-and-forth between Abiomed and the FDA were false and misleading. Defendants claimed that Abiomed policy was to refrain from off-label marketing and that Abiomed was taking steps to resolve the FDA's concerns, but in fact Abiomed was engaged in widespread management-directed off-label marketing and promotion of the Impella 2.5 . . . and was not properly addressing the FDA's issues. In particular, plaintiffs cite the following statement, some version of which was contained in Abiomed's Q1 2012 10-Q, Q2 2012 10-Q, and Q3 2012 10-Q: Although our policy is to refrain from statements that could be considered off-label -18- promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion. In June 2011, we received a warning letter from the FDA stating that some of our promotional materials marketed the Impella 2.5 for uses that had not been approved by the FDA. We have cooperated with the FDA in addressing its concerns and believe that we have resolved the matter without any penalties. Although we believe that this issue has been resolved, if similar matters come up in the future, we may not be able to resolve them without facing significant consequences. Abiomed's 2012 Form 10-K, filed on June 4, 2012, used similar language, and added: [I]n April 2012, we received a follow up letter from the FDA stating that some of our promotional materials continued to market the Impella 2.5 in ways that are not compliant with FDA regulations. We are cooperating with the FDA in addressing its concerns. While we hope to be able to resolve this matter without incurring penalties, we may not be able to resolve it, or any similar matters that may come up in the future without facing significant consequences. Such matters could result in reduced demand for our products and would have a material adverse effect on our operations and prospects. Finally, the complaint alleges that the certifications of Minogue and Bowen contained in the Form 10-Qs and the Form 10-K were false and misleading because the forms did not fairly present in all material respects the financial condition [of Abiomed], including the reliance on off-label marketing, and that the revenue and growth reported therein was the result of undisclosed, illicit and unsustainable off-label marketing. -19- Plaintiffs make additional allegations that they argue bolster the inference that defendants had the requisite scienter (that is, that they had the conscious intent to defraud investors or acted with a high degree of recklessness). First, they contend that Minogue, Bowen, and other senior Abiomed executives sold an uncharacteristically large amount of stock during the Class Period. Minogue allegedly sold 586,149 shares of Abiomed stock, representing 48% of his holdings, for a total of $9,636,124 from January 2010 through the end of the Class Period. Bowen sold 57,919 shares, representing 6.5% of his holdings, for $1,302,878 during that period, after having sold no stock before January 2010. Plaintiffs cite similar figures for five other non-defendant Abiomed executives, who collectively earned approximately $5.6 million by selling stock during this period. Defendants counter that many of the trades cited by plaintiffs were made pursuant to 10b5-1 plans which were entered into before the Class Period (August 4, 2011, to October 31, 2012) and Minogue in fact increased his holdings of Abiomed stock during the Class Period. Defendants also counter that the reason Bowen made no trades prior to the cited period was because he only became eligible to trade Abiomed stock during that period. Plaintiffs also allege that, because the Impella 2.5 was part of Abiomed's core business, Minogue and Bowen must have been aware of the fact that Abiomed was unlawfully promoting the device, -20- and that the pervasiveness of the illicit and off-label marketing and promotion of the Impella 2.5 . . . further supports a strong inference of scienter. F. Summary Distilled to its essence, plaintiffs' complaint tells the following story: For a 38-month period, beginning with the FDA's Untitled Letter in January 2010 and ending with the FDA's Close-Out Letter in February 2013, the FDA repeatedly raised concerns that Abiomed's marketing of the Impella 2.5 did not comply with applicable regulations. Abiomed responded to these concerns by making limited changes to its promotional tactics, but the FDA was not satisfied until the summer of 2012, when Abiomed conducted an internal compliance audit and pulled all of its marketing and training materials, to be replaced with entirely new ones. Confidential witnesses cited in the complaint state that Abiomed's senior management was aware that its promotional practices before that audit were in violation of FDA regulations and willfully chose not to alter them. We note that might raise issues under FDA regulations. What raises securities law concerns, according to plaintiffs, is that management allegedly misled investors during this period by (1) failing to attribute the growth in Impella revenues to unlawful off-label marketing practices; (2) improperly comparing the Impella 2.5 to the IABP by touting the results of the -21- Protect II Study; (3) stating that it had a policy of not engaging in off-label marketing; and (4) stating that Abiomed was taking steps to address the agency's concerns, when in fact the company was engaged in intentional and pervasive off-label marketing, contrary to its stated policy.