Shash v. Biogen, Inc.

84 F.4th 1

Nadia SHASH, individually and on behalf of all others similarly situated;Amjad Khan, individually and on behalf of all others similarly situated, Plaintiffs, Appellants,Victor D. Menashe, individually andon behalf of all others similarly situated, Plaintiff, v. BIOGEN, INC.; Michel Vounatsos; Alfred W. Sandrock, Jr.;Samantha Budd Haeberlein, Defendants, Appellees,Jeffrey D. Capello; Michael R. McDonnell, Defendants.

No. 22-1773

United States Court of Appeals, First Circuit

October 11, 2023

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Indira Talwani, U.S. District Judge]

Robert K. Kry, with whom Fu Shek Rocky Li, Sara E. Margolis, Swara Saraiya, MoloLamken LLP, Laurence M. Rosen, and The Rosen Law Firm, P.A. were on brief, for appellants.

Audra J. Soloway, with whom Daniel S. Sinnreich, Danielle J. Marryshow, Paul, Weiss, Rifkind, Wharton & Garrison LLP, William J. Trach, and Latham & Watkins LLP were on brief, for appellees.

Before Barron, Chief Judge, Howard and Gelpí, Circuit Judges.

GELPÍ, Circuit Judge.

Following a significant drop in Biogen Inc.'s stock price, Plaintiff-Appellant Nadia Shash and other investors (collectively, "investors") brought a securities fraud class action alleging that Defendants-Appellees¹ ("Defendants") violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, investors contend that Defendants concealed data that, if revealed, would have established that Defendants' statements about its Alzheimer's disease drug's clinical trials were misleading. Defendants moved to dismiss, and the district court granted the motion, concluding that investors failed to adequately allege a misleading statement or omission, scienter, and loss causation. For the reasons explained herein, we affirm the district court's dismissal of investors' securities fraud claims, except with respect to one particular statement for which we conclude that investors' pleadings adequately stated a claim.

I. Background

When reviewing a motion to dismiss, we recount the underlying facts as alleged in the complaint, "supplemented by certain materials the [D]efendants filed in the district court in support of their motion to dismiss."² Constr. Indus. & Laborers Joint Pension Tr. v. Carbonite, Inc., 22 F.4th 1, 4 (1st Cir. 2021) (quoting Mehta v. Ocular Therapeutix, Inc., 955 F.3d 194, 198 (1st Cir. 2020)). Our recitation refers to the investors' second amended complaint and omits any conclusory allegations. See Ponsa-Rabell v. Santander Sec. LLC, 35 F.4th 26, 30 n.2 (1st Cir. 2022).

A. Facts

Biogen is a publicly traded biotechnology company headquartered in Cambridge, Massachusetts, that develops and manufactures products to treat a variety of diseases and disorders. This case revolves around Biogen's Alzheimer's disease treatment, aducanumab.

Alzheimer's disease is a neurodegenerative disease of the brain, characterized by the progressive loss of cognitive function. Although the progression of the disease is well understood, its cause remains unknown. A leading hypothesis theorizes that the protein amyloid beta builds up in the brain and forms into larger structures called plaques, which interfere with synaptic connections, resulting in loss of cognition and other symptoms.

Aducanumab is a monoclonal antibody that specifically targets aggregated amyloid beta. Biogen believed that aducanumab could slow the progression of Alzheimer's disease by removing the amyloid plaque present in patients' brains. Before Biogen could seek approval from the Food and Drug Administration ("FDA") to market the antibody, aducanumab had to go through a series of studies to establish its tolerability, safety, and efficacy. At issue here are the reported results of aducanumab's Phase III trials: ENGAGE and EMERGE.

ENGAGE (Study 301) and EMERGE (Study 302) were identically designed, double-blinded, placebo-controlled studies that were conducted independently, with ENGAGE beginning one month ahead of EMERGE. Each study had three dosage arms: placebo, aducanumab low dose, and aducanumab high dose. Two-thirds of the studies' participants carried the APOE4 gene ("carriers"), which predisposes a carrier to developing both Alzheimer's disease and ARIA,³ an aducanumab side effect. APOE4 carriers were equally distributed across the studies' three arms. While the studies were ongoing, Biogen amended the dosing protocol for carriers twice. The first amendment, Protocol Version 3 ("PV3"), allowed carriers to titrate (gradually increase) to their target dose following an ARIA event once their symptoms resolved.⁴ The second amendment, Protocol Version 4 ("PV4"), increased the maximum high dose of aducanumab for carriers from 6 mg/kg to 10 mg/kg, meaning that, after the amendment, all high dose patients were titrated to 10 mg/kg regardless of carrier status.

To test aducanumab's efficacy over the course of the studies, Biogen selected five assessment tools, which measured a patient's cognition and function, and used biomarker tracking and special imaging to measure amyloid plaque reduction in patients' brains.⁵ Patients were evaluated upon entering the study and then again at six months, twelve months, and eighteen months. The studies' protocol required an independent group to perform a futility analysis once 50% of the participants had the opportunity to complete the primary efficacy assessment at the end of eighteen months (Week 78). If the analysis showed that aducanumab was unlikely to prove effective, meaning that the studies had less than a 20% chance of meeting their primary endpoint, the studies were to be terminated early.

ENGAGE and EMERGE began in August 2015 and September 2015, respectively. The cutoff date for data used in the futility analysis was December 28, 2018; however, Biogen continued to collect data beyond that point. On March 21, 2019, Biogen publicly announced that the studies met the futility criteria and were being terminated. Subsequently, Biogen's stock price fell over 29%.

Following the termination of aducanumab's Phase III studies, Biogen conducted its own internal review of the clinical data, including the data collected in the interim between the futility cutoff and when the studies ended. Said review revealed that when ENGAGE and EMERGE were analyzed independently -- as opposed to together, with their data being pooled as the futility analysis called for -- EMERGE's high dose arm met the primary and secondary efficacy endpoints. Biogen shared this with the FDA and in June 2019 met with the agency to discuss pathways to approval for aducanumab. The end result was a collaborative Biogen/FDA working group dedicated to analyzing and understanding aducanumab's Phase III clinical data.

On October 22, 2019,⁶ seven months after Biogen terminated the ENGAGE and EMERGE studies, Biogen announced, during a third-quarter earnings call, its belief that post hoc analysis (conducted after futility was announced) of the Phase III clinical data supported a regulatory filing for aducanumab. Specifically, Alfred W. Sandrock, Jr. ("Sandrock"), Biogen's then-Chief Medical Officer and Executive Vice President of Research and Development, told investors:

Our primary learning from these data is that sufficient exposure to high dose aducanumab reduced clinical decline across multiple clinical endpoints. This reduction in clinical decline was statistically significant in EMERGE, and we believe that patients — that the data from patients who achieved sufficient exposure to high dose aducanumab in ENGAGE support the findings of EMERGE. After consultation with the FDA, we believe that the totality of these data support a regulatory filing.

He explained the changed perspective on aducanumab's futility as follows:

[P]atients included in the futility analysis were those who had enrolled early in the trials and those early enrolling patients had a lower average exposure to aducanumab in large part due to two protocol amendments that occurred sometime after the start of the trials. These two protocol amendments were put in place precisely to enable more patients to reach high dose aducanumab, and for a longer duration. As a consequence, the larger dataset available after trial cessation included more patients with sufficient exposure to high dose aducanumab.

Sandrock also told investors "that there is a very sort of sharp dose response" and that "you have to get to high dose aducanumab" because "intermediate dosing at least in an 18-month trial is not enough." During the same call, Samantha Budd Haeberlein ("Budd Haeberlein"), Biogen's then-Vice President of Clinical Development and later Senior Vice President/Head of the Neurodegeneration Development Unit, agreed with Sandrock and stated:

Although the primary and secondary endpoints were not met in ENGAGE in post analysis, the subset of patients who received sufficient exposure to 10 milligram per kilogram aducanumab in this case, at least 10 doses of 10 milligram per kilogram showed similar results to the comparable population from EMERGE, in terms of both amyloid plaque reduction and reduced clinical decline on CDR-SB . . . . I think what we have learned clearly is that dose is very important, but that if individuals do receive 10 milligrams per kilogram then they do have an efficacious response.

The next day, during an interview on MSNBC, Michel Vounatsos ("Vounatsos"), Biogen's then-Chief Executive Officer, said the following:

What we demonstrate is that [aducanumab] . . . is able to erode and eliminate the plaque leading to the benefits we see in terms of cognition for the patients. It reduces basically the decline and we can see effects such as on memory orientation, language, but also functionally the ability to take care of oneself.

After Biogen's positive public statements about aducanumab in October 2019, the company presented its topline Phase III results on December 5, 2019, at an Alzheimer's disease conference. During said...