Corban v. Sarepta Therapeutics, Inc. et al

Filing 77

Judge Indira Talwani: ORDER entered. MEMORANDUM AND ORDER: For the reasons set forth in the attached Memorandum and Order, Defendants Motion to Dismiss Plaintiffs Amended Complaint [#42] is ALLOWED and the Consolidated Class Action Complaint [#39] is hereby dismissed.(MacDonald, Gail)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
MARK A. CORBAN, individually and on
behalf of all others similarly situated,
Plaintiffs,
v.
SAREPTA THERAPEUTICS, INC.;
CHRIS GARABEDIAN; SANDY
MAHATME; and ED KAYE,
Defendants.

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Civil Action No. 14-cv-10201-IT

MEMORANDUM & ORDER
March 31, 2015
I.

Background
This putative federal securities class action lawsuit challenges statements and omissions

concerning a biopharmaceutical company’s drug candidate for the treatment of a rare disease.
Plaintiffs allege that Sarepta Therapeutics, Inc. (“Sarepta”) and Individual Defendants Chris
Garabedian, Sandy Mahatme, and Ed Kaye violated section 10(b) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78j(b), and Rule 10b–5, 17 C.F.R. § 240.10b–5, promulgated thereunder,
and that the Individual Defendants also violated section 20(a) of the Exchange Act. Presently
before the court is Defendants’ Motion to Dismiss Plaintiffs’ Amended Complaint [#42].
Because the court finds that Plaintiffs have not adequately alleged any actionable misstatements
or omissions, Defendants’ motion to dismiss is allowed.

II.

Facts1
The putative class members purchased the securities of Sarepta during the period of July

10, 2013 through November 11, 2013 (the “Class Period”). Consolidated Class Action Compl.
¶ 1 [#39] (“Compl.”). During the Class Period, Sarepta was focused on advancing eteplirsen—
its leading drug candidate for the treatment of Duchenne muscular dystrophy (“DMD”)—
through the Food and Drug Administration’s (“FDA”) approval process. Id. ¶¶ 14, 21. DMD, a
rare genetic disease caused by a mutation in the dystrophin gene, results in the absence of
dystrophin—a protein necessary for muscle function. Id. ¶ 14. Currently, no approved diseasemodifying therapies exist for DMD. Id. ¶ 16.
As the Complaint explains, the first step toward accelerated approval of a drug is the
FDA’s acceptance for consideration of a New Drug Application (“NDA”). Id. ¶¶ 36-37. The
FDA’s decision to accept an NDA is not based on the merits of the product, but is a threshold
determination of whether there exists sufficient data to examine the product and permit
substantive review. Id.
A.

Eteplirsen’s Clinical Trials

Eteplirsen allows the cells of certain DMD patients to produce truncated but functional
dystrophin. Id. ¶ 47. To test its safety and efficacy, Sarepta evaluated eteplirsen in a
randomized, double-blind study (Study 201). In Study 201, Sarepta enrolled twelve boys aged
seven to thirteen years who had a genotype amenable to treatment. Id. ¶ 48. These patients were
randomized to one of three treatments weekly—placebo, eteplirsen 30 mg/kg, and eteplirsen 50
mg/kg. Id. After 24 weeks, all patients receiving the placebo were then given eteplirsen at 30
1

Because the issues analyzed here arise in the context of a motion to dismiss, this court presents
the facts as they are related in Plaintiffs’ Complaint, see Trans-Spec Truck Serv., Inc. v.
Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008), and construes those facts in the light most
favorable to Plaintiffs, see Pettengill v. Curtis, 584 F. Supp. 2d 348, 362 (D. Mass. 2008)
(quoting Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 96 (1st Cir. 2007)).
2

mg/kg or 50 mg/kg. Id. After 28 weeks, all patients were rolled over into a long-term study
(Study 202), which continued to follow the product’s efficacy and safety. Id. These studies
were conducted as part of Sarepta’s Phase IIb clinical trials. Id. ¶ 18.
The success or failure of a clinical trial can be measured by whether the trial meets a prespecified endpoint or outcome and by the statistical significance of its results. Id. ¶ 27. For
eteplirsen, the pre-specified endpoint concerned the change in the percent of dystrophin-positive
fibers present in muscle biopsies. Id. ¶ 49. By restoring semi-functional dystrophin production
in DMD patients, Sarepta hypothesized that eteplirsen could restore or prevent further
deterioration of muscle weakness. Id. To evaluate the product’s effectiveness, Sarepta collected
muscle biopsies from all patients before treatment, at Week 12 from the four patients in the 50
mg/kg cohort and two placebo-treated patients, at Week 24 from the four patients in the 30
mg/kg cohort and two placebo-treated patients, and again from all patients at Week 48.
According to these trials, eteplirsen treatment of 12 weeks or longer resulted in increased
dystrophin production in all patients. Id.
An important secondary endpoint tied to the product’s clinical efficacy, however, was the
six-minute walk test (6MWT). Id. ¶ 50. This test measures how far a patient can walk in six
minutes. Id. In Sarepta’s Phase IIb clinical trials, there was no statistically significant difference
in how far patients who received 30 mg/kg of eteplirsen could walk in six minutes as compared
to patients on placebo. Id. Similarly, there was no statistically significant difference when
combining the results from the patients on 30 mg/kg and 50 mg/kg of eteplirsen and comparing
those results to those of placebo patients. Id. Plaintiffs allege that to avoid these adverse results,
Sarepta excluded data from two patients in the 30 mg/kg cohort who had lost walking ability
during the trials. Id.

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B.

Plaintiffs’ Investigation

Conducting its own investigation into Sarepta’s Phase IIb clinical trials, Plaintiffs provide
an opinion from its own expert as well as information from three former Sarepta employees.
First, Plaintiffs provide the opinion of Richard A. Guarino, a medical doctor who has worked in
the pharmaceutical industry for over forty years and is purported to be an expert on the FDA’s
standards and regulations for drug approval. Id. ¶ 52. Dr. Guarino, after reviewing the available
data regarding the eteplirsen trials, concludes that the trials suffered from significant problems
such that FDA approval of an NDA was highly unlikely. Id. ¶ 53. This conclusion is based on
the following: (1) that the patient population established by Sarepta was too small to lay the
groundwork for a Phase III trial program, never mind approval based only on a Phase II study,
and (2) that Sarepta deviated from the intent-to-treat guidelines by excluding two patients who
lost ambulation, which biased the efficacy and safety results of the trial, and whose inclusion
resulted in no meaningfully statistical significant differences versus placebo. Id.
As concerns the latter point, the Complaint details the FDA’s policy regarding the
collection, maintenance, and inclusion of clinical study data, including information on subjects
who withdraw from clinical studies. Id. ¶ 43. As explained by the FDA in its Guidance for
Sponsors, Clinical Investigators, and IRBs: Data Retention When Subjects Withdraw from
FDA-Regulated Clinical Trials, “FDA law and regulations recognize that a complete and
accurate risk/benefit profile of an investigational product depends upon the data from every
subject’s experience in the clinical trial.” Id. ¶ 45. Removal of already collected data—
including data from subjects who have withdrawn from the study—would undermine the
scientific and ethical integrity of the research. Id. ¶ 46. For these reasons, the FDA has long
advised against so called “informative censoring,” recommending instead an “intent-to-treat”

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approach in which the tester analyzes data related to all subjects that the investigator intended to
treat while utilizing different approaches for the interpretation and imputation of missing data.
Id. ¶ 45.
In addition, Plaintiffs allege facts provided by three former Sarepta employees.
Confidential Witness 1 (“CW 1”), who previously served as Senior Clinical Director at Sarepta,
recalls from company meetings that Defendant Chris Garabedian—President, CEO, and a
director of Sarepta during the relevant time period—chose the efficacy endpoints for eteplirsen
and tended to push his own plans through without generating consensus within the company. Id.
¶ 56. CW 1 also explained how Sarepta proceeded without first obtaining a Special Protocol
Assessment, a tool by which the sponsor of a clinical trial and the FDA meet to discuss the
sponsor’s proposed protocols and reduce any agreements to writing that becomes part of the
administrative record. Id. ¶ 25. Through this mechanism, the sponsor can incorporate any
recommendations from the FDA into their trials. Id. ¶ 57. According to CW 1, Sarepta took on
tremendous risk in foregoing a Special Protocol Assessment, as the FDA had never before
approved a drug in eteplirsen’s class. Id. This, combined with the trial’s small study group,
hampered the likelihood of FDA approval of eteplirsen. Id.
Confidential Witness 2 (“CW 2”) and Confidential Witness 3 (“CW 3”) added similar
information concerning Defendant Garabedian’s “hands-on” approach. According to CW 2,
Sarepta’s former Associate Director of Business Development, Garabedian was informed on
every facet of the company, including the progress of eteplirsen, as he “micro-managed” and
“weighed in on everything, down to the type of letterhead on the stationary.” Id. ¶ 60.2 CW 3
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In connection with their motion, Defendants submitted a declaration from Eileen Faucher to
controvert facts alleged in the Complaint. See Decl. Eileen Faucher [#43-2]. For purposes of
this motion to dismiss, however, the court considers the allegations made in the complaint and
not Ms. Faucher’s assertions in her declaration.
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also describes Garabedian as very “hands on” in designing and interpreting the clinical trials and
data for eteplirsen. Id. ¶ 64. Additionally, CW 2 relates how none of the companies approached
by Sarepta to form a joint-venture decided to pursue such an arrangement because of those
companies’ various concerns over eteplirsen and Sarepta’s ability to obtain FDA approval. Id.
¶ 61.
C.

False and Misleading Statements Alleged in the Complaint

As discussed further below, Plaintiffs allege misstatements and omissions from ten
separate disclosures made by Defendants during the Class Period concerning etiplirsen’s test
results and data set, Defendants’ discussions with the FDA in July 2013, and the adverse
implications of a failed Phase 3 trial of a drug developed by two other companies for the
treatment of DMD.
III.

Discussion
Defendants move to dismiss the Complaint for failing to (1) allege any actionable

misstatements or omissions, and (2) establish a strong inference of scienter as required by the
Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4(b)(2).
A.

Elements of a Rule 10b-5 Claim and Pleading Standards

Under section 10(b) and Rule 10b-5,3 a claim of securities fraud has six elements: (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. ACA Fin. Guar. Corp. v.
3

“Section 10(b) of the Securities Exchange Act of 1934 forbids the ‘use or employ, in
connection with the purchase or sale of any security . . . , [of] any manipulative or deceptive
device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe
as necessary or appropriate in the public interest or for the protection of investors.’” Tellabs,
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007) (quoting 15 U.S.C. § 78j(b)).
SEC Rule 10b-5 implements this section by declaring it unlawful to, among other actions, “make
any untrue statement of a material fact or to omit to state a material fact necessary in order to
make the statements made . . . not misleading.” Id. (quoting 17 CFR § 240.10b–5).
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Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008). At the motion to dismiss stage, the court “accept[s]
well-pleaded factual allegations in the complaint as true and view[s] all reasonable inferences in
the plaintiffs’ favor.” Id. To survive a motion to dismiss, a complaint must include factual
allegations that, taken as true, demonstrate a plausible claim for relief. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555–58 (2007). “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
In securities fraud cases, the plaintiffs must also meet the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b) and the PSLRA. Under Rule 9(b),
plaintiffs must plead fraud with particularity. Fed. R. Civ. P. 9(b). Under the PSLRA, plaintiffs
must “‘specify each statement alleged to have been misleading [and] the reason or reasons why
the statement is misleading.’” ACA Fin. Guar. Corp., 512 F.3d at 58 (quoting 15 U.S.C. § 78u4(b)(1)).
Additionally, “[t]he PSLRA also separately imposes a rigorous pleading standard on
allegations of scienter.” Id. To overcome a motion to dismiss, plaintiffs must “state with
particularity facts giving rise to a strong inference that the defendant acted with the required state
of mind.” § 78u-4(b)(2). In the First Circuit, “a plaintiff may satisfy the scienter requirement
with a showing of either conscious intent to defraud or a high degree of recklessness.” ACA Fin.
Guar. Corp., 512 F.3d at 58 (quotation marks and citations omitted).
B.

Material Misstatements and Omissions

“To prevail on a § 10(b) claim, a plaintiff must show that the defendant made a statement
that was ‘misleading as to a material fact.’” Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct.
1309, 1318 (2011) (quoting Basic Inc. v. Levinson, 485 U.S. 224, 238 (1988) (emphasis in

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original)). “A fact is material when there is a substantial likelihood that a reasonable investor
would have viewed it as significantly altering the total mix of information made available.” Fire
and Police Pension Ass’n v. Simon, 778 F.3d 228, 240 (1st Cir. 2015) (quotation marks and
citations omitted).
The mere possession of material non-public information, however, does not create a duty
to disclose it. Hill v. Gozani, 638 F.3d 40, 57 (1st Cir. 2011). A duty to disclose, rather, is
created when a corporation speaks, as Rule 10b-5 requires disclosure when “necessary in order
to make the statements made, in the light of the circumstances under which they were made, not
misleading,” 17 C.F.R. § 240.10b–5. “Nevertheless, this obligation has its limits: It ‘does not
mean that by revealing one fact about a product, one must reveal all others that, too, would be
interesting, market-wise’; a company must reveal only those facts ‘that are needed so that what
was revealed would not be so incomplete as to mislead.’” Hill, 638 F.3d at 57 (quoting Backman
v. Polaroid Corp., 910 F.2d 10, 16 (1st Cir. 1990)).
1.

Claims based on eteplirsen’s trial results and data set

Plaintiffs point to Defendants’ statements concerning the comprehensiveness of
eteplirsen’s trials, the definitiveness and robustness of eteplirsen’s trial results, and the
correlation between eteplirsen-induced dystrophin and a clinical benefit. See Pls.’ Corrected
Mem. Law Opp’n Defs.’ Mot Dismiss, 12 [#49] (“Opp’n”). For example, at the start of the Class
Period, on July 10, 2013, Defendant Garabedian made a number of statements in a presentation
he gave to analysts and investors at the JMP Securities Healthcare Conference. During the
presentation, Garabedian described eteplirsen’s trial results, stating that the product’s positive
results showed “a high level of consistency” and that “every single patient” has shown stable
walking times. Compl. ¶ 66. Defendant Garabedian stated further that the patient data from

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eteplirsen’s trials, in Sarapta’s view, was “clear evidence that the dystrophin we are
producing . . . is resulting in this stabilization or essentially halting of the progression of this
disease in terms of ambulation.” Id.
During a July 24, 2013 conference call, Garabedian stated that the dystrophin-positive
fibers at Week 48 were “leading to stabilization in all of our available ambulatory patients.” Id.
¶ 71. He stated further that “[w]e have a very rich clinical outcome data set, we believe, based
on the Six-minute walk benefit now through week 84.” Id. During that same call, an analyst
questioned Garabedian whether such a small patient data set would make the FDA comfortable
with the predictability of a reasonably likely clinical benefit. Id. Garabedian responded by
stating that “it’s not about the size of the study but it’s about the treatment effect,” while
referencing another source discussing that “clinical outcomes that are robust in a small study can
form the basis of a full approval.” Id. Garabedian also stated that “I think that we believe that
our dystrophin analysis is robust and is consistent across genotypes.” Id.
Likewise, on August 8, 2013, Garabedian further stated that “we have a very strong basis
that the dystrophin that we’re producing is validating the clinical outcomes that we’re seeing and
should be acceptable as a surrogate end point under the accelerated approval pathway.” Id. ¶ 75.
And in an August 8, 2013 press release, the company stated that “eteplirsen-treated patients
evaluable on the 6-minute walk test (6MWT)” demonstrated stabilization in walking ability
compared to a placebo/delayed treatment cohort, while reiterating in that press release as well as
during a September 9, 2013 investor conference that the trial’s results were “consistent,”
“stable,” and “robust.” Id. ¶¶ 74, 84.
Plaintiffs argue that these statements were misleading because eteplirsen’s Phase IIb
trials utilized a population of only ten to twelve patients. They contend that the statements of a

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correlation between dystrophin and a clinical benefit were false and misleading because
Defendants omitted that two patients, out of twelve, lost ambulation entirely despite showing a
significant increase in dystrophin levels, which undermined the correlation between dystrophin
and the stabilization of walking ability. Id. ¶¶ 67, 82. Plaintiffs allege that Defendants excluded
data from those two patients in discussing eteplirsen’s trial results, the inclusion of which would
have caused the results to show no statistically significant improvements in walking ability. Id.
¶ 67.
The court finds that the challenged statements were not materially misleading because
Sarepta repeatedly disclosed—both before and during the Class Period—the fact that it had
excluded data from those two patients.4 For instance, before the start of the Class Period, in an
October 3, 2012 press release disclosing eteplirsen’s trial results, the company disclosed the trial
results and its interpretations of those results with respect to both the intent-to-treat (ITT)
population as well as with respect to a modified intent-to-treat population (mITT), that is, the
population with the two patients excluded. See Decl. Vito Supp. Mem. Law. Supp. Defs.’ Mot.
4

In considering this motion, the court “must consider the complaint in its entirety, as well as
other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in
particular, documents incorporated into the complaint by reference, and matters of which a court
may take judicial notice.” Tellabs, Inc., 551 U.S. at 322. “Courts are permitted, in some
instances, to consider on a Rule 12(b)(6) motion documents that were not attached to the
complaint.” Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 74 (1st Cir. 2014). “[T]hese
‘narrow exceptions’ . . . include ‘documents the authenticity of which are not disputed by the
parties; . . . documents central to plaintiffs’ claim; or . . . documents sufficiently referred to in the
complaint.’” Id. (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)). In connection with
their motion to dismiss, Defendants submitted a number of documents in support of their
arguments, see Docket Entry #44, which the parties have treated as properly before the court.
Some of these documents, such as Sarepta’s public filings with the U.S. Securities and Exchange
Commission, are clearly ones in which the court may take judicial notice. To the extent,
however, that any document does not fall within the narrow exceptions articulated by the First
Circuit, the parties have had ample opportunity to object or present additional material pertinent
to the motion, see, e.g., Decl. William B. Federman Supp. Pls.’ Mem. Law Opp’n Defs.’ Mot
Dismiss [#47] (attaching exhibits), and, therefore, the motion is properly treated as one for
summary judgment under Federal Rule of Civil Procedure 56. See Fed. R. Civ. P. 12(d).
10

Dismiss, Ex. 15 at 1-2 [#44] (“Vito Decl.”). As to the ITT population, the company explained
that it found a statistically significant treatment benefit for eteplirsen-treated patients who
received 50 mg/kg of the drug weekly, but that “[t]here was no statistically significant difference
between the cohort of patients who received 30 mg/kg weekly of eteplirsen and the
placebo/delayed treatment cohort.” Id. at 1. Following a chart depicting the ITT results, the
company then provided the following information:
Modified Intent-to-Treat (mITT)
The 6MWT results were further analyzed using the mITT population which
excluded two patients who were randomized to the 30 mg/kg weekly eteplirsen
cohort who showed signs of rapid disease progression within weeks after
enrollment and were unable to perform measures of ambulation beyond 24 weeks.
This mITT population consisted of 10 patients (4 eteplirsen-treated patients
receiving 50 mg/kg weekly, 2 eteplirsentreated patients receiving 30 mg/kg
weekly, and 4 placebo/delayed-treatment patients).
Id.
Moreover, at the start of the Class Period, on July 10, 2013, the company gave an
investor presentation in which it disclosed that the results for eteplirsen’s Phase IIb study
depicted in the presentation were based on an mITT population. See id. Ex. 24 at 18-21. And
again, on August 8, 2013, the company issued a press release promoting the publication of a
peer-reviewed article in the Annals of Neurology that described eteplirsen’s clinical trial results.
See Compl. ¶ 74. This peer-reviewed article described the results for both the ITT and mITT
populations and provided a rationale for the use of the mITT approach. See id., Ex. 2. On a
conference call held on that same day, an analyst discussed the two patients who had been
excluded from the study, stating that he “was struck by the fact that they had a similar increase to
the mean in terms of the dystrophin that was put back into their muscles.” Id. ¶ 75. In response,
Defendant Kaye—Senior Vice President and Chief Medical Officer of Sarepta—stated that

11

“once that muscle is fibrotic, we can’t repair it and based on all of the data it appears that it was
too late for these boys.” Id.
These are but some examples of the disclosures provided by the company, which make
clear that the market and scientific community was informed that the company was basing its
more favorable results on an mITT population. That the company defended use of the mITT
population and cast its trial results in a positive light does not detract from this disclosure, as “[a]
defendant does not have a duty to cast the descriptions of its business in the most negative light.”
Coyne v. Metabolix, Inc., 943 F. Supp. 2d 259, 269 (D. Mass. 2013). Accordingly, claims that
the company made material misstatements or omissions based on Sarepta’s use of the mITT
population must fail.
Likewise, claims based on Defendants’ statements touting the strength of eteplirsen’s
data set also fail. As stated above, the market was clearly aware of the company’s use of the
mITT population and Plaintiffs thus cannot allege that Defendants presented factually inaccurate
information to the market. Moreover, many of the challenged statements consist of
interpretations of the company’s data, which constitute non-actionable expressions of opinion
unless Plaintiffs can allege that (1) the company’s opinions were both objectively and
subjectively false, i.e., that the person holding the opinion did not subjectively believe in it, (2)
self-embedded facts within the opinion are untrue, or (3) “material facts about the [opinion
holder’s] inquiry into or knowledge concerning a statement of opinion” were omitted.”
Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, No. 13-435, 2015 WL
1291916, at *6, 8 (S. Ct. Mar. 24, 2015). Here, Plaintiffs have not made such a showing.

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2.

Claims based on Defendants’ discussions with the FDA

Plaintiffs allege that Defendants did not adequately disclose that the FDA had raised
questions and/or concerns in July 2013 regarding Sarepta’s dystrophin quantification
methodology. In a July 24, 2013 press release, Sarepta announced its plans to submit an NDA
for the approval of eteplirsen. Compl. ¶ 70. The press release provided that
The decision to submit an NDA for eteplirsen in 2014 is based on productive
interactions with the FDA in a meeting that occurred this week. That meeting
was a follow-up to the FDA’s review of two recently submitted summary
documents that included data on dystrophin and clinical outcomes from the
existing eteplirsen studies. The FDA stated in pre-meeting comments that the
Agency is “open to considering an NDA based on these data for filing.” The
Agency, however, requested additional information related to the methodology
and verification of dystrophin quantification. Sarepta believes the requests from
the Agency can be addressed and incorporated into an NDA submission in the
first half of 2014.
Vito Decl. Ex. 6. In the press release, Sarepta also stated that it was “encouraged by the
feedback from the FDA and believe that data from our ongoing clinical study merits review by
the Agency and will be sufficient for an NDA filing,” but that “the exact timing of the
submission will be dependent on further discussions and agreement with the FDA on the
information needed for an acceptable filing.” Id. (internal quotation marks omitted). Moreover,
Sarepta explained that
The Agency would not commit to declaring dystrophin an acceptable surrogate
endpoint under the CFR 314 Subpart H Accelerated Approval pathway prior to an
NDA filing and commented that a decision by the Agency to file “the NDA would
not indicate that we have accepted dystrophin expression as a biomarker
reasonably likely to predict clinical benefit. A filing would only indicate that the
question merits review, and that we deem the data to be reviewable.”
Id.
In August 2013, Sarepta reiterated this information. For example, on an August 8, 2013
conference call, Garabedian stated that the FDA’s “feedback is particularly encouraging because

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it recognizes that our Phase IIB study data set is sufficient for the FDA to consider a filing.”
Compl. ¶ 75. During an August 13, 2013 presentation, Garabedian characterized the news that
the FDA would consider an NDA filing as the “type of information that every company hopes
for which is an encouraging sign from the FDA that a mid-stage trial, a phase II study is strong in
enough to consider for an NDA filing.” Id. ¶ 80.
Thereafter, on November 12, 2013, the company issued a press release announcing the
FDA’s current position that an NDA filing for eteplirsen would be premature and disclosing
excerpts from the FDA’s most recent pre-meeting comments, including that “[s]ince our last
meeting, our concern about the shortcomings of your current quantification methods has grown.”
Id. ¶ 90. That same press release disclosed that the FDA had informed the company that it
“believe[s] that a placebo-controlled trial would be the most likely method for developing
interpretable evidence of efficacy for eteplirsen” and that it “would like to discuss the perceived
barriers to conducting such a trial with you.” Id.
Plaintiffs claim that Defendants did not adequately disclose that the FDA had raised
concerns regarding its dystrophin quantification methodology at the July 2013 meeting. Based
on the FDA’s pre-meeting comments explaining the reversal of its position, Plaintiffs posit that
Sarepta’s disclosures made after the company’s July 2013 meeting with the FDA were materially
misleading because the FDA’s pre-meeting comments released in November 2013 demonstrate
that the FDA had communicated to Sarepta that the information it had developed to date was
insufficient. Plaintiffs argue that this information was known to the company prior to November
12, 2013, pointing to Garabedian’s statements made during a conference call held on that same
date, in which he stated that “the agency has reiterated their demand for a placebo-controlled
study.” Id. ¶ 91 (emphasis in original). Plaintiffs also argue that any “perceived barriers” that

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Sarepta had raised would have predated the November 2013 pre-meeting comments, evidencing
that the FDA had previously expressed a preference for a placebo-controlled study.
Plaintiffs’ arguments, however, are undermined by the company’s disclosures made in its
July 24, 2013 press release announcing its decision to submit an NDA for eteplirsen. In the press
release, the company disclosed that “[t]he FDA stated in pre-meeting comments that the Agency
is ‘open to considering an NDA based on these data for filing,’” but immediately qualified that
disclosure by stating that “[t]he Agency, however, requested additional information related to the
methodology and verification of dystrophin quantification.” Vito Decl. Ex. 6. After expressing
its opinion that these requests could be addressed and incorporated into an NDA submission in
the first half of 2014, the company further explained that “the exact timing of the submission will
be dependent on further discussions and agreement with the FDA on the information needed for
an acceptable filing.” Id. The company, moreover, warned that statements about “the potential
filing and acceptance of an NDA for eteplirsen” was “subject to risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by such statement,”
including that “the FDA may determine that our NDA submission for eteplirsen does not qualify
for filing or that substantial additional data is required for accelerated or other approvals.” Id.
Plaintiffs do not appear to argue that any statement in the July 24, 2013 press release was
false, but rather dispute the extent to which the company disclosed the FDA’s issues concerning
an NDA filing for eteplirsen. The press release, however, not only announced that the company
had decided to submit an NDA in 2014 and quoted the FDA’s pre-meeting comments that it was
“open to considering an NDA based on these data for filing,” but it informed the public that the
FDA had requested additional information related to the methodology and verification of
dystrophin quantification and that the company would have further discussions with the FDA on

15

the information needed for an acceptable filing. Defendants were under no duty, at that time, to
delve into the FDA’s specific concerns over the sufficiency of eteplirsen’s potential NDA
application, at least absent their making of statements that would contradict such concerns. See
Simon, 778 F.3d at 244 (stating that “[t]here must be some room for give and take between a
regulated entity and its regulator”). Moreover, the company’s statements that it was encouraged
by the feedback and believed its data would be sufficient for a filing constituted an expression of
opinion, which as described above is not actionable unless Plaintiffs show that these beliefs were
not subjectively held. Thus, based on the above, the company did not mislead the public in its
July 24, 2013 press release.
Plaintiffs further argue that, in light of the FDA’s comments released in November 2013,
the company went too far and materially misled investors in statements made after July 24, 2013.
Plaintiffs challenge, for instance, statements asserting that eteplirsen’s “Phase IIB study data set
is sufficient for the FDA to consider a filing,” Compl. ¶ 75, and that the FDA’s feedback was the
“type of information that every company hopes for which is an encouraging sign from the FDA
that a mid-stage trial, a phase II study is strong in enough to consider for an NDA filing,” id.
¶ 80. Plaintiffs argue that these statements were materially misleading because, based on the
FDA’s pre-meeting comments released in November 2013, “it is evident that the FDA had
expressed concerns about both the Phase II data set and its clinical outcomes during the July
2013 meeting.” Opp’n at 22 (emphasis in original).
The challenged statements, however, though couched in more optimistic language after
July 24, 2013, do nothing more than reiterate what had already been disclosed in the July 24,
2013 press release. Such statements are not materially misleading merely because Plaintiffs
“seem to take issue with . . . the general ‘rosy’ picture that defendants attempted to paint about

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the results.” See Bristol Pension Fund v. Vertex Pharm. Inc., 12 F. Supp. 3d 225, 237–238 (D.
Mass. 2014). “[I]t is not illegal for a company to paint a positive or optimistic picture when
disclosing information to investors,” as long as such a picture is not misleading. Id. at 238.
Plaintiffs’ allegation that “it is evident” that the FDA expressed concerns to the company
in July 2013 such that Defendants’ post-July 2013 statements were misleading is made upon
information and belief and is based on the company’s release of some of the FDA’s pre-meeting
comments in November 2013. The FDA’s pre-meeting comment released in November 2013
that “[s]ince our last meeting, our concern about the shortcomings of your current quantification
methods has grown,” see Compl. ¶ 90, without more, does not shed light on the magnitude of the
FDA’s concern in July 2013 or whether, for instance, the FDA thought that the company could
alleviate such concern by providing additional information. Likewise, the FDA’s comments that
it “believe[s] that a placebo-controlled trial would be the most likely method for developing
interpretable evidence of efficacy for eteplirsen” and that it “would like to discuss the perceived
barriers to conducting such a trial with you,” id., also lack sufficient detail. Although these
comments show that the issue of a placebo-controlled trial was likely discussed during the July
2013 meeting, Plaintiffs’ allegations do not reveal any specifics about this discussion, such as
how strongly the FDA had expressed its preference for a placebo-controlled trial. In light of the
company’s disclosures concerning the July 2013 meeting—that the FDA had “requested
additional information related to the methodology and verification of dystrophin quantification”
and that “the FDA may determine . . . that substantial additional data is required for accelerated
or other approvals,” Vito Decl. Ex. 6,—the court finds that Plaintiffs have not met their pleading
burden under the PSLRA.

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Lastly, Plaintiffs contend that Defendants’ statements emphasizing the feedback and
guidance that the company had received from the FDA was materially misleading because the
company omitted that it had elected to conduct its Phase IIb trials without first obtaining a
Special Protocol Assessment. See Compl. ¶¶ 73, 76, 82, 86. This assertion, however, falls far
short from alleging a material misstatement or omission. As the Complaint explains, in rare
instances, a sponsor can seek accelerated approval for a drug and may submit an NDA before
clinical trials are complete. Id. ¶ 36. Here, the Complaint admits that “Sarepta has held
meetings with the FDA to explore the potential for accelerated approval of eteplirsen based on
dystrophin levels as a surrogate endpoint.” Id. ¶ 51. Due to the unmet need that could be solved
by eteplirsen, Sarepta frequently consulted with the FDA. In making the challenged statements,
the company merely acknowledged the consultation that they were receiving from the FDA. In
light of the above, the fact that Sarepta had not obtained a Special Protocol Assessment was not
one which the company was required to reveal. See Hill, 638 F.3d at 57.
3.

Claims based on the failed Phase 3 trial of drisapersen

During an October 17, 2013 presentation, Defendants Garabedian and Kaye addressed
the failed Phase 3 trial of drisapersen, a drug developed by Prosensa and GlaxoSmithKline which
similarly worked to increase dystrophin to achieve a clinical benefit documented by the sixminute walk test. They stated that the results “underscore[d] how important it is to have a
chemistry that does not have dose-related toxicity that may prohibit a dose that is active enough
to produce a clinical effect.” Compl. ¶ 85. Defendants asserted further that, due to its different
chemical structure, eteplirsen may be given in doses “that are five-to eightfold greater than those
doses studied in the disapersen trials.” Id. In making these statements, Defendants distinguished
eteplirsen from drisapersen based on the former’s chemical structure and ability to be tested in

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higher doses, which, according to Defendants, produced a “robust and consistent response.” Id.
Plaintiffs argue that these statements misled the public.
Plaintiffs contend that the correlation between eteplirsen and a clinical benefit was
undermined by the failed Phase 3 trial of drisapersen and that Defendants downplayed the
adverse implications of that failed test. Specifically, Plaintiffs take issue with Defendants’
statements distinguishing eteplirsen by the fact that it can be administered in doses “five-to
eightfold greater” than the doses studied in the drisapersen trials. Plaintiffs assert that the failed
drisapersen trials did not occur because of the ineffectiveness of that drug’s dosage but rather
because of the disconnect between the increased expression of dystrophin and clinical efficacy
for drisapersen, and that “[t]his was the precise problem facing Sarepta, which Sarepta hid
through the exclusion adverse data.” Opp’n at 18-19.
But, as previously stated, the company repeatedly disclosed its use of the mITT
population—it did not “hide” any purported disconnect between the increased expression of
dystrophin and clinical efficacy. Plaintiffs’ claim, therefore, boils down to their disagreement
with Defendants’ interpretation of drisapersen’s failed trial results and how those results related
to eteplirsen’s ongoing trials. As explained above, such opinions are non-actionable unless
Plaintiffs allege that Defendants did not subjectively believe them, that self-embedded facts
within the opinion were untrue, or that material facts related to Defendants’ inquiry into or
knowledge concerning the opinion were omitted, see Omnicare, Inc., 2015 WL 1291916, at *6,
8, which they have not done.
C.

Section 20(a) Claims

Plaintiffs’ claims against the Individual Defendants under Section 20(a) of the Exchange
Act, 15 U.S.C. § 78t, must also fail because Plaintiffs have not adequately pled a claim under

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section 10(b) and Rule 10b-5. See ACA Fin. Guar. Corp., 512 F.3d at 67 (“The plain terms of
section 20(a) indicate that it only creates liability derivative of an underlying securities
violation.”).
IV.

Conclusion
For the foregoing reasons, Defendants’ Motion to Dismiss Plaintiffs’ Amended

Complaint [#42] is ALLOWED and the Consolidated Class Action Complaint [#39] is hereby
dismissed.
IT IS SO ORDERED.
Date: March 31, 2015

/s/ Indira Talwani
United States District Judge

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