Paxton v. Provention Bio, Inc.

ADAM PAXTON, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. PROVENTION BIO, INC., ASHLEIGH PALMER, and ANDREW DRECHSLER, Defendants.

Civil Action No. 3:21-cv-11613

United States District Court, D. New Jersey

August 4, 2022

OPINION

Plaintiffs George L. Jordan, Jr. and Adam Paxton, individually and on behalf of all others similarly situated, filed an amended class action complaint (“CAC”) against Provention Bio, Inc. (the “Company”), its founder and Chief Executive Officer Ashleigh Palmer, and its Chief Financial Officer Andrew Drechsler (collectively “Defendants”), alleging securities fraud in connection with statements and omissions concerning teplizumab, the Company's candidate drug for delaying Type One Diabetes (“T1D”). ECF No. 32 (CAC) ¶¶ 1-2, 25, 26. Before the Court is Defendants' motion to dismiss the CAC pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6), and the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4(b). ECF No. 44. For the reasons below, Defendants' motion will be granted.

I

A^[1]

Teplizumab is a drug intended to delay or prevent the progression of T1D. CAC ¶ 58. T1D is an autoimmune disease that generally progresses in three stages-Stage 1 Stage 2, and Stage 3-corresponding to decreasing cell function. CAC ¶¶ 50-52. After the University of Chicago developed teplizumab, MacroGenics, Inc. acquired it in 2005 and partnered with Eli Lilly to manufacture the drug in Ireland and conduct clinical trials testing whether teplizumab could delay the progression of T1D in newly diagnosed Stage 3 T1D patients (the “Stage 3 clinical trial”). CAC ¶ 56. In 2010, the Stage 3 clinical trial concluded that teplizumab failed to delay the progression of T1D in Stage 3 T1D patients, and MacroGenics halted development of the drug. CAC ¶ 56.

The following year, the National Institute of Diabetes and Digestive and Kidney Diseases (“NIDDKD”) and TrialNet spearheaded another clinical trial to test whether teplizumab could delay the progression of T1D in at-risk Stage 2 T1D patients and prevent progression to Stage 3 T1D (the “Stage 2 clinical trial”). CAC ¶¶ 57-60. In June 2019, the Stage 2 clinical trial announced positive results, concluding that “a single 14-day course of teplizumab in patients with Stage 2 T1D significantly delayed the median onset of clinical Stage 3 T1D by a minimum of two years compared to the placebo” and “more patients who took teplizumab remained free of clinical Stage 3 T1D beyond five years compared to patients who took the placebo.” CAC ¶¶ 60-61. TrialNet published the results of the Stage 2 clinical trial, which ultimately involved seventy-six participants (forty-four of whom were treated with teplizumab and thirty-two of whom were given a placebo), in the New England Journal of Medicine on August 15, 2019. See CAC ¶ 84; Kevan C. Herold, et al., An Anti-CD3 Antibody Teplizumab, in Relatives at Risk for Type 1 Diabetes, 381 New Eng. J. Med. 603-13 (August 15, 2019), https://www.nejm.org/doi/pdf/10.1056/NEJMoa1902226?articleTools=true.^[2] In May 2018, while the Stage 2 clinical trial was ongoing, the Company acquired teplizumab from MacroGenics. CAC ¶¶ 2-3, 49. A few months later, the Company contracted with AGC Biologics to manufacture the drug in Seattle, Washington. CAC ¶ 49. After release of the positive results of the Stage 2 clinic trial, the Company applied for a Breakthrough Therapy Designation for teplizumab, which the U.S. Food and Drug Administration (“FDA”) granted in August 2019. CAC ¶¶ 4, 64. A Breakthrough Therapy Designation expedites the FDA's review of a drug “and is only given to potential drugs that are intended to treat a serious condition and [where] preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint[].” CAC ¶ 64. The designation also allows a developer to submit a Biologics License Application (“BLA”) on a rolling basis and obtain priority review. CAC ¶ 4. If granted, a BLA permits the developer to introduce the drug into interstate commerce. CAC ¶ 33. Generally, a BLA requires the developer to show that its drug is safe to use and safely manufactured. CAC ¶ 36 (citing 42 U.S.C. § 262(a)(2)(C)).

On April 16, 2020, the Company announced the start of its rolling submission of a BLA for teplizumab. CAC ¶ 65. Because the Company's BLA relied on the Phase 2 clinical trial that used teplizumab manufactured in Ireland, and the Company would be manufacturing its teplizumab in Seattle, the Company had to demonstrate that the two drugs were “biocomparable.” CAC ¶¶ 37, 66. To accomplish this, the Company conducted a bridging study to show that the Ireland-manufactured drug and its Seattle-manufactured drug “ha[d] a similar lasting impact on a patient's body in both time and effect” (the “Bridging Study”). CAC ¶¶ 67-69. The Bridging Study analyzed pharmacokinetic (“PK”) and pharmacodynamic (“PD”) data. CAC ¶ 67. PK refers to the “activity of drugs in the body over a period of time, including the process by which drugs are absorbed, distributed in the body, localized in the tissues, and excreted” (i.e., time data), CAC ¶ 67, and PD refers to “how the body reacts to a drug” (i.e., effect data), CAC ¶ 67. The “traditional” measure of PK is called “area-under-the-curve” (“AUC”). CAC ¶¶ 37, 68. In this context, AUC refers to the area underneath a curved line on a graph of data where the y axis is concentration of the drug in the body and the x axis is time- meaning AUC “reflects the actual body exposure to a drug after the administration of a dose” with a higher AUC corresponding to increased concentration of the drug in the body at that particular point in time along the x axis. CAC ¶¶ 37, 68. The Bridging Study was the first time the Company's Seattle-manufactured teplizumab was tested on humans. CAC ¶ 72.

In November 2020, the Company completed its rolling BLA submission. CAC ¶ 6. The Company issued a press release on November 2, 2020 stating that its submission “represent[ed] a . . . critical step toward the potential first major advancement in T1D therapudics since insulin was introduced a century ago,” and the Company “look[ed] forward to continuing on [its] path toward changing the current treatment paradigm for T1D and, if approved, bringing teplizumab, designated by the FDA as a Breakthrough Therapy, to the U.S. market in 2021.” CAC ¶ 75 (emphasis omitted); Ex. 18 at 1-2. The Company's stock price rose about 18% in the following two days. CAC ¶ 77.

On November 5, 2020, the Company issued another press release, held an earnings call, and filed a Form 10-Q. The press release stated that the Company was “excited about the progress [its] team has made in recent months as [it] work[ed] to redefine the treatment landscape for T1D,” reiterated that the Company's “completion of the rolling BLA submission for teplizumab” was a “major milestone,” and stated that the Company was “focused on preparing for a potential product approval and launch in mid-2021.” CAC ¶ 78 (emphasis omitted).

On the earnings call, Palmer noted the Company's “positive manufacturing progress,” recapped the positive results of the Stage 2 clinical trial, and explained that “[t]hroughout the remainder of 2020, [the Company] plan[s] to transition and transform . . . into a commercialization ready organization in anticipation of the potential launch of teplizumab next year.” CAC ¶¶ 80-81 (emphasis omitted).

The Form 10-Q added that “[i]n June 2020, extended follow-up data from the [Stage 2 clinical trial] was announced which showed that a single 14-day course of teplizumab significantly delayed the onset of T1D in [a]t-[r]isk patients by a median of approximately three years compared to the placebo,” and “no additional safety signals ha[d] been noted [and] the results showed that teplizumab's effect on delaying the onset of clinical T1D was not only consistent from previous analyses, but was durable and now extended to a median of at least three years.” CAC ¶¶ 84-85 (emphasis omitted). The Form 10-Q also noted that the Company may not be able to “successfully start and complete clinical trials and obtain regulatory approval for the marketing of [the Company's] product candidates.” CAC ¶ 83 (emphasis omitted); Ex. 19 at 3 (emphasis omitted).

On November 18, 2020, Palmer spoke at a virtual healthcare conference and stated, “Not only are the results of the [Stage 2 clinical trial] highly statistically significant . . ., they are also highly clinically relevant,” and that the Company “successfully completed the transfer of teplizumab's prior commercial scale manufacturing process from Eli Lilly's manufacturing facility in Ireland to [the Company]'s contract manufacturing partner AGC Biologics in Seattle.” CAC ¶ 88-89 (emphasis omitted).

On December 10, 2020, an analyst reported that a Company representative stated that the Company “expect[ed] an [FDA] advisory committee [to review its application] . . . and [the Company] would be ready for one if need be.” CAC ¶ 91 (citations omitted).

On January 4, 2021, the Company issued another press release announcing that the FDA officially filed the teplizumab BLA, granted the Company's request for priority review, and scheduled an advisory committee meeting for May 2021. CAC ¶ 92; Ex. 20 at 1. The press release also stated that the Company “intend[s] to work closely with the FDA to support their review while also preparing for a potential product launch in the third quarter of 2021.” CAC ¶ 92 (emphasis omitted); Ex. 20 at 1. The Company's stock price rose 7.79% from December 31, 2020 to January 4, 2021. CAC ¶ 95.

At a conference with biotech investors on January 11, 2021, Palmer stated...