In Re: Biogen Inc. Sec. Litig.

Filing

OPINION issued by Sandra L. Lynch, Appellate Judge; Kermit V. Lipez, Appellate Judge and William J. Kayatta, Jr., Appellate Judge. Published. [16-1976]

Case: 16-1976

Document: 00117154184

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Date Filed: 05/12/2017

Entry ID: 6091729

United States Court of Appeals
For the First Circuit
No. 16-1976
IN RE: BIOGEN INC. SECURITIES LITIGATION

GBR GROUP, LTD.,
Plaintiff, Appellant,
NICOLE TEHRANI,
Plaintiff,
v.
BIOGEN INC.; GEORGE A. SCANGOS;
PAUL J. CLANCY; STUART A. KINGSLEY,
Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]

Before
Lynch, Lipez, and Kayatta,
Circuit Judges.

Michael P. Canty, with whom Jonathan Gardner, Guillaume
Buell, Labaton Sucharow LLP, Andrea M. Landry, Thornton Law Firm
LLP, Peretz Bronstein, Yitzchak E. Soloveichik, and Bronstein
Gewirtz & Grossman LLC were on brief, for appellants.
James R. Carroll, with whom Michael S. Hines, Sara J. van
Vliet, and Skadden, Arps, Slate, Meagher & Flom LLP were on brief,
for appellees.

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LYNCH, Circuit Judge.

Date Filed: 05/12/2017

Entry ID: 6091729

This securities case involves

allegations that corporate officials misled the public about the
effect of one patient's death on sales of Tecfidera, a drug for
multiple sclerosis ("MS") and the company's leading source of
revenue.
GBR Group, Ltd. ("GBR") is the lead plaintiff in a
putative class action against Biogen Inc. ("Biogen") and three
Biogen executives (together, "the defendants") alleging violations
under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 (the "Exchange Act").
plaintiffs'

initial

See 15 U.S.C. §§ 78j(b), 78t(a).

amended

complaint

alleged

that,

The
from

December 2, 2014 to July 23, 2015 (the "Class Period"), the
defendants knowingly misled the investing public regarding the
impact that the death of a patient taking Tecfidera had on sales
of Tecfidera.
The

district

court

dismissed

the

initial

amended

complaint with prejudice, for failure to meet the heightened
pleading requirements of the Private Securities Litigation Reform
Act ("PSLRA").

In re: Biogen Inc. Sec. Litig. (Biogen), 193 F.

Supp. 3d 5, 12–13 (D. Mass. 2016); see 15 U.S.C. §§ 78u-4, 78u-5.
The court then denied the plaintiffs' subsequent motion under
Federal Rules of Civil Procedure 59(e) and 60(b)(2) to vacate the
judgment and for leave to file a second amended complaint to
include purportedly new evidence.

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GBR appeals the dismissal of

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the initial amended complaint and particularly emphasizes its
appeal from the denial of the motion to vacate the judgment and
for leave to amend the complaint.
We reject these claims and affirm on both issues.

We

agree, on de novo review, that the initial amended complaint fails
to plead particularized facts giving rise to a strong inference of
scienter, as required by the PSLRA.

And there was no error or

abuse of discretion in the denial of the motion to vacate the
judgment and for leave to file a second amended complaint.
I.
Biogen,

whose

stock

trades

on

the

NASDAQ,

is

a

biopharmaceutical company that develops, manufactures, and markets
medication for the treatment of neurological disorders.

During

the relevant period, defendant George Scangos was Biogen's Chief
Executive Officer, defendant Paul Clancy was its Chief Financial
Officer and Executive Vice President of Finance, and defendant
Stuart

Kingsley

was

Commercial Operations.

its

Executive

Vice

President

of

Global

The Class Period is from December 2, 2014

to July 23, 2015.
One of the four principal drugs Biogen markets for MS
treatment is Tecfidera, which the FDA approved for use in March
2013 and which Biogen began selling during the second fiscal
quarter of 2013.

Tecfidera has been a significant source of

revenue for Biogen, and it was regularly accounting for a third of

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Biogen's total quarterly revenues by the start of the Class Period.
Tecfidera's revenue growth depended on three factors: (1) the
number of patients recently diagnosed with MS who started their
treatment on Tecfidera ("new starts"); (2) the number of patients
who switched over to Tecfidera from other drugs; and (3) the growth
of the MS drug market.
Biogen released its third-quarter 2014 financial results
on October 22, 2014.

The company reported total revenues of $2.51

billion, an increase of 3.7% from the previous quarter, as well as
third-quarter revenue from Tecfidera alone of $787.1 million: a
12.4% increase from the previous quarter, but a lower growth rate
than those of the previous four quarters (growth rates of 49.1%,
39.0%, 27.1%, and 38.5%, respectively).

On the same date, Biogen

held an earnings call to discuss the third-quarter report and
announced, for the first time, that an MS patient had died of
progressive multifocal leukoencephalopathy (the "PML death" or
"PML incident").

The patient had taken Tecfidera for more than

four years in a clinical study.
released,

Kingsley

stated

At the time this information was

publicly

that

Tecfidera

growth

was

"moderat[ing]."
The FDA issued a warning to the public about the PML
death on November 25, 2014, and Tecfidera's label in the United
States was updated to describe the risk of PML death on December
3, 2014, one day after the beginning of the Class Period.

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On

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December 2, 2014, the first day of the Class Period, Clancy told
analysts that investors should be "mindful" of the fact that
Tecfidera

discontinuation

rates

(the

rates

at

which

patients

discontinued use of Tecfidera) were higher than the company had
hoped.
On January 29, 2015, Biogen issued full-year revenue
guidance for 2015, in which it stated that it expected overall
revenue growth of 14% to 16%.
alleges

that

the

The initial amended complaint

"[d]efendants

reiterated

that

Tecfidera

performance remained strong and stated that they had not seen any
meaningful

change

in

discontinuation

rates,"

analysts accepted this characterization.

and

that

stock

At the time of this

announcement, Kingsley also stated that there was a moderation in
new Tecfidera starts and cited, among other things, the updated
label describing the PML incident.

He then made similar remarks

during a conference on February 25, 2015 -- that is, about halfway
through the first quarter of 2015.
On April 24, 2015, Biogen released its first-quarter
results for 2015, announcing Tecfidera revenue of $825 million,
"below the market's consensus estimates."

Scangos stated at that

time that "Tecfidera had a more challenging quarter, due to a
number of issues, including an overall slowing of the MS market,
the recent launch of Plegridy, the single PML case reported last
year, and some first-quarter financial dynamics . . . ."

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He

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emphasized that "our long-term outlook for Tecfidera, and for our
entire MS portfolio, remains strong."

From April to July, the

defendants continued to express optimism about Tecfidera, stating
that its performance had "stabilized" since the announcement of
the PML incident and that data suggested positive "momentum."

At

four analyst conferences in May 2015, Biogen executives noted that
Tecfidera's growth was slowing and named the PML incident as one
factor in that slowed growth.
On July 24, 2015, the day after the end of the Class
Period,

Biogen

released

its

second-quarter

earnings

report.

Biogen announced revenue of $883 million from Tecfidera, which was
a 7.1% increase from the first quarter but less than the $916
million of Tecfidera revenue from the last quarter of 2014.

Also

that day, the company revised its 2015 revenue guidance, lowering
its estimate of overall revenue growth from 14–16% to 6-8%.

The

decrease in the guidance was "based largely on revised expectations
for the growth of Tecfidera."

Biogen's stock fell over 20% in one

day in response to the announcement.
Nearly two months after the end of the Class Period, on
September 18, 2015, Kingsley stated at a health care conference
that "some kind of a downtick in the safety profile that would
have some kind of an impact on physician behavior" had been
expected in the wake of the PML incident, but that "we couldn't
tell," and that the PML incident was "a pretty big change statement
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for a broad base of physicians."
these as "evidentiary admissions."]

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Entry ID: 6091729

[The plaintiffs characterize
On October 9, 2015, Biogen

announced that Kingsley was leaving the company.

On October 21,

2015, Biogen announced cuts that would eliminate about 11% of its
workforce.
II.
Nicole Tehrani filed the initial "bare-bones" complaint
alleging securities fraud on August 18, 2015.

After a status

conference on November 17, 2015, the district court appointed GBR
as the lead plaintiff and granted the plaintiffs an additional
sixty days, as they requested, to file an amended complaint.
The plaintiffs filed their amended complaint on January
19, 2016.

The amended complaint alleges claims under Section

10(b) of the Exchange Act and Rule 10b-5 thereunder (Counts I &
II), and under Section 20(a) of the Exchange Act (Count III).
The amended complaint alleges that throughout the Class
Period, the defendants knowingly misled the investing public by
never "provid[ing] any indication that the PML death had materially
impacted Tecfidera sales, or caused physicians to stop prescribing
Tecfidera or [to] switch patients onto other therapies out of
safety concerns."

The complaint specifies over twenty allegedly

misleading statements that the defendants made across ten dates
during the Class Period.

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As proof that the statements were misleading and made
with scienter, the complaint makes several other allegations, many
of which are based on statements from ten confidential witnesses
("CWs").
establish

The
that

confidential
Biogen

witness

experienced

a

statements
significant

purportedly
decline

in

Tecfidera sales following the announcement of the PML incident and
throughout the Class Period.

The confidential witness statements

also describe corporate events and policy changes that purportedly
establish the defendants' private acknowledgment of this decline
in Tecfidera sales and its connection to the PML death.1
The

complaint

further

alleges

that

Tecfidera

was

Biogen's core product and that the defendants had access to sales
data and physician feedback following the PML death.

It alleges

that Kingsley, due to his proximity to the sales team, would have
been aware of the significant impact the PML death had on Tecfidera
sales.

Finally, it alleges that Scangos and Clancy had motive and

1

For example, CW 2 alleges that during a November 2014
Biogen town hall meeting, Scangos gave a presentation stating that
"the overall sense of the trajectory [at Biogen] was changing,"
and that another speaker talked of "potential organizational
changes," which CW 2 understood to come from "executive
management's expectation that the PML death would have 'an impact
on performance.'" CW 1 and CW 3 reported attending a March 2015
national sales meeting at which the PML incident was described as
a "market event." "[S]peakers at the meeting stated that sales
would need to pick up again if [Biogen] was going to meet expected
14–16% revenue growth [forecast publically in January]" and
unidentified "senior Biogen leaders at the meeting acknowledged
that the PML death definitely was impacting Tecfidera sales."

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opportunity to make false statements concerning Tecfidera sales
because they had personal bonus targets based on revenue growth,
which in turn depended on Tecfidera sales.
The
prejudice.

defendants

moved

to

dismiss

the

complaint

with

The plaintiffs conceded in their opposition to the

motion to dismiss that Count II should be dismissed.
The district court granted the motion to dismiss in a
careful and thoughtful opinion filed on June 23, 2016.
193 F. Supp. 3d at 12–13.

Biogen,

Drawing all reasonable inferences in

favor of the plaintiffs, the court determined that, of the more
than twenty statements alleged to be material misstatements or
omissions, three were plausibly misleading or false.2

Id. at 42–

2

These three statements, all made in the first quarter of
2015, were:
•
Kingsley on the January 29, 2015 earnings call:
"Importantly, we have not noticed a meaningful change in
[Tecfidera] discontinuation rates."
•
Kingsley on the same earnings call: "[T]he lack of any
meaningful change that we see -- or we believe we're seeing -- in
the discon[tinuation] rate is encouraging, because it doesn't
suggest there's such a change in the profile that people are
anxious to pull patients out, but on the contrary."
•
Kingsley at the February 25, 2015 health care
conference: "We have not seen any change in the discontinuation
rate. There is a natural discontinuation rate for a product like
Tecfidera in terms of tolerability and other things.
You'd
obviously get very concerned if you saw a spike in the
discontinuation rate.
No evidence of that. . . . [The
discontinuation rate has] been consistent with -- I mean, we look
at it relative to the growth of the product.
There's nothing
that's a signal that says it's not consistent with historical
averages."

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43.

Document: 00117154184

But

the

allegations,

court

including

Page: 11

found
the

that,

Date Filed: 05/12/2017

although

statements

from

the
the

Entry ID: 6091729

complaint's
confidential

witnesses, gave rise to a plausible inference of scienter, they
did not give rise to the strong one required by the PSLRA.
at 45.

Id.

Moreover, the court found that the record gave rise to

compelling inferences in the defendants' favor.

Id. at 51–54.

The district court dismissed Count I's allegations under
Section 10(b) with prejudice on June 23, 2016.

Id. at 54.

Given

that the plaintiffs had not adequately pled an underlying violation
of the Exchange Act, the district court also dismissed Count III's
allegations under Section 20(a) with prejudice.3

Id. at 54–55.

On July 21, 2016, the plaintiffs filed a proposed second
amended complaint and moved under Federal Rules of Civil Procedure
59(e)

and

60(b)(2)

to

vacate

discovered scienter evidence.

the

dismissal

based

on

newly

The court found that the new

evidence could have been discovered earlier with the exercise of
reasonable diligence and denied the plaintiffs the "extraordinary"

Id. at 42–43.
3

The district court noted that the plaintiffs had
requested, on the final page of their opposition to the motion to
dismiss, that they be given leave to amend their complaint if the
motion to dismiss were granted. Id. at 55. The court refused,
noting that the plaintiffs had had over five more months after the
filing of the initial complaint to investigate and that the
plaintiffs had not moved for leave to amend either after the filing
of the motion to dismiss or after the motion hearing, during which
the court had expressed skepticism about the complaint's
viability. Id.

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relief requested under Rules 59(e) and 60(b)(2).

Entry ID: 6091729

GBR's timely

appeal followed.
III.
A.

Allowance of Motion to Dismiss the Initial Amended Complaint
GBR argues that the district court erred by dismissing

its claims under Sections 10(b) and 20(a) of the Exchange Act.

In

particular, GBR contends that the district court wrongly held that
two statements4 specified in the complaint were inadequately pled
as misleading and that the complaint failed to give rise to a
strong inference of scienter.
novo.

We disagree.

Our review is de

See ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58

(1st Cir. 2008).
Plaintiffs alleging violations of Section 10(b) must
plead (1) a material misrepresentation or omission; (2) scienter;
(3) a

connection

with

the

purchase

or

sale

of

a

security;

(4) reliance; (5) economic loss; and (6) loss causation.

4

Fire &

GBR argues that the district court improperly rejected
the following two statements by defendants specified in the
complaint: Kingsley's statement on April 24, 2015, that "internal
market research" suggested that physician intent to prescribe
Tecfidera was improving; and a May 13, 2015 statement by Doug
Williams (Biogen's Executive Vice President of Research &
Development) that "survey work" showed that "physicians have kind
of digested" the PML death and that physician "perspective about
the safety profile of the drug" was "back to where it was before
the PML event." We agree with the district court that there were
no allegations supporting any inference that these statements were
misleading.
But even assuming GBR were correct, the complaint
would still fail to meet the PSLRA's requirements as to scienter.

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Police Pension Ass'n of Colo. v. Abiomed, Inc. (Fire & Police
Pension), 778 F.3d 228, 240 (1st Cir. 2015).

A complaint alleging

a violation of Section 10(b) must also meet the heightened pleading
standards of the PSLRA, which requires that the complaint "specify
each statement alleged to have been misleading" as well as "the
reason or reasons why the statement is misleading."

15 U.S.C.

§ 78u-4(b)(1).
As to scienter, the PSLRA requires that a complaint
allege specific facts giving rise to a "strong inference," id.
§ 78u-4(b)(2)(A),
designed

to

either

deceive

or

of

"intentional

defraud

or

investors

by

willful

conduct

controlling

or

artificially affecting the price of securities," City of Dearborn
Heights Act 345 Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d
751, 757 (1st Cir. 2011) (quoting Ernst & Ernst v. Hochfelder, 425
U.S. 185, 199 (1976)), or of "a high degree of recklessness," id.
(quoting Aldridge v. A.T. Cross Corp., 284 F.3d 72, 82 (1st Cir.
2002)).

"Recklessness, as used in this context, 'does not include

ordinary negligence, but is closer to being a lesser form of
intent.'"

Fire & Police Pension, 778 F.3d at 240 (quoting Greebel

v. FTP Software, Inc., 194 F.3d 185, 188 (1st Cir. 1999)).

For

an inference of scienter to be strong, "a reasonable person would
[have to] deem [it] cogent and at least as compelling as any
opposing

inference

one

could

draw

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from

the

facts

alleged."

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Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324
(2007).
The complaint fails to meet this rigorous standard.

The

confidential witness statements are insufficiently particular, do
not make misleading the defendants' public disclosures, and do not
speak

with

specificity

misstatements

were

as

to
or

untrue

why

the

defendants'

misleading.

alleged

Likewise,

the

complaint's "core operations" allegations are consistent with the
defendants'

statements

to

investors.

And

the

most

cogent

and

"Evidentiary

inferences from the record favor the defendants.
1.

The

Confidential
Admissions"
complaint's

Witness

Statements

allegations

as

to

scienter

rest

substantially on the confidential witness statements and on the
core operations allegations.

The statements, very often made

about events occurring after the defendants' statements at issue,
are so lacking in connecting detail that they cannot give rise to
a strong inference of scienter.

At bottom, the majority of the

confidential

say

witness

statements

merely

that

Biogen

sales

regions experienced a serious decline in Tecfidera sales after the
PML incident and after the purportedly misleading statements were
made, that corporate changes were discussed at company events in

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relation to the PML incident, and that the company changed the
sales goals of at least some employees.5
The

statements

do

not

even

begin

to

magnitude of the sales decline at the company level.

quantify

the

They do not

explain with any precision whether the sales decline resulted from
higher discontinuations, fewer new starts, changes in the market,
or some combination of these factors.6

Nor do they purport to

contradict any of the financial information released by Biogen in
its quarterly and yearly reports during the Class Period.

5

GBR's own briefing only confirms this point.
In its
argument that the confidential witness statements are sufficiently
particularized to give rise to a strong inference of scienter, GBR
writes "the seven former [Area Business Managers] indicate that
sales 'dropped steeply and immediately,' [that] there was a 'large
drop in new prescription sales,' that 'sales dropped dramatically'
and 'appreciably,' [and] that there was a 'big slowdown' in market
expansion and a 'serious downturn' in new prescriptions."
6

Similarly, the internal meetings and policy changes
described by the confidential witness statements do not make up
for the complaint's deficiencies.
Scangos's statement at the
November 2014 town hall meeting that the "trajectory" of the
company was changing has no content about that change or its
connection to the PML incident. Likewise, the presentation at the
November 2014 meeting that suggested there may be "organizational
changes" and that the PML death had an "impact" on sales does
nothing to show that the defendants' public statements were made
with any knowledge of falsity.
The statements by unidentified "senior Biogen leaders"
at the March 2015 national sales meeting that the PML event
"definitely was impacting sales" and that the PML death was a
"market event" are no more concrete, and, coming as they do in the
middle of the Class Period, they shed no light on the alleged
misrepresentations that occurred before March 2015.
The
confidential witness statements about lowered sales goals are not
connected to the defendants.

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Indeed,

the

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confidential

witness

Entry ID: 6091729

statements

consistent with the defendants' public disclosures.

are

See In re

Genzyme Corp. Sec. Litig., 754 F.3d 31, 42–43 (1st Cir. 2014)
(noting that prompt disclosures by corporate defendants "undercut
any inference of fraudulent intent"); Auto. Indus. Pension Tr.
Fund v. Textron Inc., 682 F.3d 34, 40 (1st Cir. 2012) (declining
to find a strong inference of scienter where confidential witness
allegations

and

defendants'

public

statements

were

"not

in

conflict").

As the district court observed, the "defendants were

cautious in projecting Tecfidera's growth, and they repeatedly
warned investors about the downside risks, including moderating
growth and the PML label change."
52.

Biogen, 193 F. Supp. 3d at 51–

The defendants made such warnings on the first day of the

Class Period and continued to make them throughout.

See Fire &

Police Pension, 778 F.3d at 243 ("The argument is undercut by the
fact that [defendant] explicitly warned investors . . . .").
We emphasize that there is a significant timing problem.
The later confidential witness statements do not go to how the
defendants' statements, which were earlier, were knowingly or
recklessly misleading at the time they were made.
statements

found

plausibly

misleading

by

the

The three

district

court

concerned Tecfidera discontinuation rates and were made in January
and February 2015.

The confidential witness statements concerning

drops in Tecfidera sales after these months do not address what

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the defendants knew about discontinuation rates at the time they
spoke to the public.

And none of the earlier confidential witness

statements go specifically to what the defendants knew at the time
they made those three statements.
One example suffices.

Two of the statements that the

district court found to be plausibly misleading were Kingsley's
remark at a January 29, 2015 health care conference that the
company

had

not

seen

a

"meaningful

change

in

[Tecfidera]

discontinuation rates," and his remark at a February 25, 2015
health care conference that discontinuation rates were "consistent
with historical averages."

Clancy had told investors on December

2, 2014, the first day of the Class Period, that investors should
be "mindful" of the fact that Tecfidera's discontinuation rates
were "tracking in the teens," higher than the company had hoped.
So scienter allegations would have to suggest strongly that between
Clancy's statement on December 2, 2014 and Kingsley's statements
in

January

and

February,

Kingsley

came

into

possession

of

information that the Tecfidera discontinuation rates had risen
above the teens and were clearly inconsistent with historical
averages.

The confidential witness statements provide no such

particularized allegations.
As

in

Fire

&

Police

Pension,

confidential

witness

statements are "not described with sufficient particularity," 778
F.3d at 245, to give rise to a strong inference of scienter as to

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senior management if none of the witnesses were senior managers
and they had little contact with such managers.

The statements

here fail to give rise to a strong inference of scienter because
they lack "specific descriptions of the precise means through which
[the defendants' alleged fraud] occurred."7

In re: Cabletron Sys.,

Inc., 311 F.3d 11, 30 (1st Cir. 2002); see also Brennan v. Zafgen,
Inc., No. 16-2057, 2017 WL 1291194, at *5 (1st Cir. Apr. 7, 2017)
(news articles insufficient for scienter because they did not
"support . . . the complaint's allegation that the defendants knew,
or were reckless in not knowing, that they risked misleading

7

It is true that CW 10 served as an executive assistant
in Biogen's "program leadership and management team," and had
responsibilities
including
supporting
Uthra
Sundaram,
the
Tecfidera program director. Sundaram was a "dotted line" report
to Scangos. According to CW 10, "Biogen's sales and commercial
teams monitored sales numbers through various reports" after the
PML incident and the company "reached out to the top prescribing
doctors as well as big pharmaceutical companies such as CVS
Caremark and Walgreens."
CW 10 further asserted that the
company's commercial team performed "deep drill downs" into sales
data, and that Sundaram accompanied Biogen medical-science
liaisons on "ride-alongs" to meet doctors and "discuss the PML
death." CW 10 said that the Tecfidera team met weekly to discuss
sales data and the effect of the PML death on sales, and that
Sundaram regularly communicated with Scangos and senior management
following that meeting.
But although CW 10's information has a tighter connection to
the defendants, it still lacks the necessary particularity. And
nothing about CW 10's statements contradicts the company's public
position or gives further context to the alleged misstatements.
The fact that the company's Tecfidera team was actively monitoring
sales in the wake of the PML incident and reported findings to
senior management is unremarkable.
It comports with the
defendants' public statements, which repeatedly returned to the
PML incident as one factor impacting Tecfidera's performance.

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Document: 00117154184

investors"

and

they

had

Page: 19

no

Date Filed: 05/12/2017

particularized

Entry ID: 6091729

connection

to

the

admissions"

GBR

defendants).
Likewise,

the

various

"evidentiary

points to as indicative of scienter all involve statements made by
the defendants, well after the end of the Class Period, that do
not provide particularized insight into the defendants' knowledge
at the time of the alleged misstatements.

See In re: Ariad Pharm.,

Inc. Sec. Litig., 842 F.3d 744, 751 (1st Cir. 2016) (finding no
strong inference of scienter where complaint failed to plead "any
specific facts about when the defendants learned of the[] adverse
events or even when the adverse events occurred").

The use of

these statements amounts to little more than pleading fraud by
hindsight.

See Miss. Pub. Emps.' Ret. Sys. v. Bos. Sci. Corp.,

523 F.3d 75, 90 (1st Cir. 2008) ("Fraud by hindsight refers to
allegations

that

assert

no

more

than

that

because

something

eventually went wrong, defendants must have known about the problem
earlier."); M. Gulati et al., Fraud by Hindsight, 98 Nw. U. L.
Rev. 773, 787 (2004) (discussing hindsight bias).
2.

"Core Operations" Allegations

GBR claims that the district court wrongly discounted
the amended complaint's "core operations" allegations because
there was no "smoking gun" or "plus factor," and argues that to

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Entry ID: 6091729

impose such a requirement runs afoul of the Supreme Court's
guidance in Tellabs.
We

need

not

resolve

the

standard

by

which

"core

operations" allegations may give rise to a strong inference of
scienter, because the allegations here clearly fall short.

The

allegations are inapt because the evidence does not establish that,
at the time the challenged statements were made, there existed
reasonably

accessible

data

within

the

company

materially

contradicting those statements.
The

defendants'

compensation

structure

holdings also weaken any inference of scienter.

and

stock

As the complaint

says, Scangos's and Clancy's compensation was keyed in part to
revenue growth.

But the complaint never alleges that there was

any misreporting of revenue.

Further, the individual defendants

increased their stock holdings in Biogen during the Class Period,
and the defendants in fact suffered losses as a result of Biogen's
decline in stock price.

This too cuts against scienter.

See Fire

& Police Pension, 778 F.3d at 246 (finding that an increase in
stock holdings during the Class Period on the part of a defendant
"negate[d] any inference that he had a motive to artificially
inflate [the company's] stock during that period"); Maldonado v.
Dominguez, 137 F.3d 1, 12 n.9 (1st Cir. 1998) (defendants' personal
losses cut against inference of scienter); cf. Brennan, 2017 WL
1291194,

at

*6

(finding

insider

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trading

allegations

of

only

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Date Filed: 05/12/2017

Entry ID: 6091729

"marginal" benefit because the corporate "insiders [had] kept the
vast majority of their [stock] holdings").
Ultimately, the scienter analysis involves evaluating
the

complaint

inferences."

as

a

whole,

including

Tellabs, 551 U.S. at 323.

"plausible

opposing

Here, we agree with the

district court that the strongest inferences are in favor of the
defendants.

See Brennan, 2017 WL 1291194, at *8 ("[T]he facts

alleged in the complaint at the very least support a strong
competing

inference

considered

to

that

be,

the

at

defendants

the

time,

disclosed
the

most

what

they

relevant

information . . . .").
3.

Section 20(a) Claim

Given that the Section 10(b) claim fails, GBR's Section
20(a) claim necessarily fails as well, because GBR has not stated
an underlying violation of the Exchange Act.

See ACA Fin. Guar.

Corp., 512 F.3d at 67–68.
B.

Denial of Motion to Vacate and for Leave to File Second
Amended Complaint
GBR argues that the district court erred by not granting

its motion to vacate the judgment and for leave to file a second
amended

complaint.

situation.

It

insists

it

was

put

in

an

impossible

GBR claims that it diligently secured new evidence and

that it could not have done so earlier.
to the contrary].

[The district court found

GBR argues that the obligations of Federal Rule

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Date Filed: 05/12/2017

Entry ID: 6091729

of Civil Procedure 11 -- which requires parties to "certif[y] that
to the best of [their] knowledge, information, and belief, formed
after an inquiry reasonable under the circumstances . . . the
factual contentions [in the motion] have evidentiary support,"
Fed. R. Civ. P. 11(b) -- precluded the plaintiffs from raising
this new information until they had completed an ethics review of
the new materials and completely vetted the allegations.

GBR

argues that the district court did not properly evaluate the
timeline in which the plaintiffs could reasonably secure and vet
this new evidence in compliance with Rule 11 before moving for
leave to amend the complaint.

The argument fails.

"We review a district court's decision to grant or deny
a motion for reconsideration under Rules 59(e) and 60(b) of the
Federal Rules of Civil Procedure for manifest abuse of discretion."
Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 81 (1st Cir. 2008).
There was no abuse of discretion at all in denying the motion.
GBR has not shown either that the purportedly new evidence would
have made a difference to the district court's decision whether to
grant the motion to dismiss or that the plaintiffs could not have
gotten the evidence earlier.

GBR's argument that the district

court abused its discretion by failing to account for the time
needed for the plaintiffs to comply with Rule 11 is misplaced.
The

new

evidence

consisted

of

allegations

from

two

additional confidential witnesses, CW 11 and CW 12, and a sworn

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Entry ID: 6091729

declaration by Dr. Ben Thrower, Medical Director of the Shepherd
Center Multiple Sclerosis Institute in Atlanta.
Dr.

Thrower's

declaration

states

that

the

Shepherd

Center determined "in approximately August 2014 that Tecfidera
compromised patients' immune systems (as was reinforced by the PML
death

announced

immediately

on

October

"completely

22,

stopped

2014),"

and

prescribing

that

the

Tecfidera

Center
for

MS

patients" and "discontinued at least half of the 400 patients
taking Tecfidera."8

As counsel for GBR conceded at oral argument,

Dr. Thrower does not say that the Shepherd Center took its actions
in response to the PML incident.

His statement merely alleges

that the Shepherd Center stopped prescribing Tecfidera and took
many patients off the drug around August 2014, which was well
before the PML incident and the start of the Class Period.9

There

can be no abuse of discretion in denying the motion, and GBR's
Rule 11 argument does nothing to address this.
The district court also acted well within its discretion
by denying the motion because the plaintiffs could have presented

8

CW 12, a former Biogen Area Business Manager in Atlanta,
alleges that Biogen was aware of the Center's decision.
9

The information from CW 11, a former Biogen Senior
Territory Business Manager in Pennsylvania, is also inadequate.
CW 11's information does not quantify the impact of the PML
incident on Tecfidera sales nationally, it has no particularized
connection to the defendants, and it does not contradict the
defendants' public positions.

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Case: 16-1976

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the evidence earlier.10

Page: 24

Date Filed: 05/12/2017

Entry ID: 6091729

It is undisputed that the plaintiffs were

aware of all three of the new sources they now identify before the
district court entered its order of dismissal.
offer

a

"cogent

information

reason"

about

why

Tecfidera

institutions sooner.
(1st Cir. 2009).

for

it

could

And GBR does not
not

obtained

from

discontinuations

have

medical

Fisher v. Kadant, Inc., 589 F.3d 505, 513

Without showing that the plaintiffs could not

in the exercise of reasonable diligence have obtained this new
evidence earlier, GBR's argument that the district court abused
its discretion by failing to account for the time the plaintiffs
needed to vet the evidence to meet their Rule 11 obligations has
no force.
The district court did not err in denying the second
motion to amend, which was filed post-dismissal.
that

the

plaintiffs

could

have

intentions earlier, but did not.

alerted

the

It commented

court

to

their

Here, the district court gave

the plaintiffs the full time they requested in order to file the
initial amendment and allowed that amended complaint, and the
plaintiffs had the motion to dismiss in hand for nearly four months

10

See Fed. R. Civ. P. 60(b)(2) (court may relieve party
from final judgment if party presents "newly discovered evidence
that, with reasonable diligence, could not have been discovered in
time to move for a new trial under Rule 59(b)"); Emmanuel v. Int'l
Bhd. of Teamsters, Local Union No. 25, 426 F.3d 416, 422 (1st Cir.
2005) (Rule 59(e) motions on the basis of new evidence succeed
only when evidence could not "have been presented earlier" "in the
exercise of due diligence").

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Page: 25

before the district court ruled.

Date Filed: 05/12/2017

Entry ID: 6091729

As we have said before, under

circumstances like these, we wish to discourage any expectation
that there will be "leisurely repeated bites at the apple." ACA
Fin. Guar. Corp., 512 F.3d at 57.
IV.
Affirmed.

Costs are awarded to the defendants.

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