Kader v. Sarepta Therapeutics, Inc. et al

Filing 46

Judge Allison D. Burroughs: ORDER entered. MEMORANDUM AND ORDER. For the foregoing reasons, Plaintiffs Motion to Strike [ECF No. 26] is ALLOWED IN PART and DENIED IN PART. Defendants Motion to Dismiss the Amended Complaint [ECFNo. 21] is ALLOWED, and all claims against the Defendants are hereby DISMISSED. SO ORDERED.(Folan, Karen)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
WILLIAM KADER, Individually and On
Behalf of All Other Persons Similarly
Situated,
Plaintiff,
v.
SAREPTA THERAPEUTICS, INC.,
CHRISTOPHER GARABEDIAN, and
SANDESH MAHATME,
Defendants.

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Civil Action No. 1:14-cv-14318-ADB

MEMORANDUM AND ORDER
This is a securities fraud putative class action. Plaintiff William Kader, and Lead
Plaintiffs Morad Ghodooshim, Roger Lam, and Laxmikant Chudasama (collectively,
“Plaintiffs”) seek to represent a class of all purchasers of securities issued by Sarepta
Therapeutics, Inc. (“Sarepta” or “the Company”) during a six-month period between April 21,
2014 and October 27, 2014 (the “Class Period”). The named defendants are Sarepta, along with
its former CEO, Christopher Garabedian (“Garabedian”), the Company’s CFO, Sandesh
Mahatme (“Mahatme”), and Edward Kaye, M.D. (“Kaye”), the Company’s Chief Medical
Officer. 1
Presently before the Court are (1) Defendants’ Motion to Dismiss for failure to state a
claim [ECF No. 21], and (2) Plaintiffs’ Motion to Strike certain exhibits submitted in support of
Defendants’ Motion to Dismiss [ECF No. 26]. For the reasons set forth in this Memorandum and

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Although Kaye does not appear in the caption of the Amended Complaint, he is named in other
sections of the Amended Complaint, and all parties have treated him as a defendant.

Order, Plaintiffs’ Motion to Strike is ALLOWED IN PART and DENIED IN PART, and
Defendants’ Motion to Dismiss is ALLOWED.
I.

BACKGROUND
Sarepta is a biopharmaceutical company focused on developing RNA-based therapeutics

for the treatment of rare and infectious diseases. In recent years, the company has been
developing drug candidates to treat a disease known as Duchenne muscular dystrophy (“DMD”).
Sarepta’s lead drug candidate is a drug called “eteplirsen.” Plaintiffs contend that during the
Class Period, Sarepta and its executives made materially misleading statements and omissions
regarding the company’s ongoing efforts to file a New Drug Application (“NDA”) for eteplirsen
with the U.S. Food and Drug Administration (“FDA”). Specifically, Plaintiffs allege that the
Defendants misstated guidance and omitted information that the FDA purportedly provided to
the Company, which pertained to the sufficiency of Sarepta’s clinical data on eteplirsen.
Plaintiffs filed their two-count Amended Complaint on March 20, 2015 [ECF No. 17],
alleging that by making misrepresentations and material omissions in connection with the
purchase or sale of Sarepta’s securities, all Defendants violated Section 10(b) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 (Count I), and the individual
Defendants violated Section 20(a) of the Exchange Act (Count II).
On May 11, 2015, Defendants moved to dismiss [ECF No. 21], arguing that the Amended
Complaint does not state an actionable claim for securities fraud because (1) Plaintiffs fail to
allege any actionable misstatements, and (2) Plaintiffs fail to allege sufficient facts on the
element of scienter. In support of their Motion, Defendants filed a Memorandum of Law [ECF
No. 22], and a supporting Declaration attaching 27 separate exhibits [ECF No. 23]. Plaintiffs
filed an Opposition to the motion to dismiss [ECF No. 25], as well as a Motion to Strike certain

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exhibits submitted by Defendants [ECF No. 26]. The parties subsequently filed reply briefs.
[ECF Nos. 29, 34]. The Court held a hearing on Defendants’ Motion to Dismiss on March 29,
2016.
II.

FACTS ALLEGED IN THE AMENDED COMPLAINT
Plaintiffs’ Amended Complaint [ECF No. 17] (hereinafter “Compl.”) alleges the

following facts, which the Court accepts as true for purposes of Defendants’ Motion to Dismiss.
A. Sarepta develops eteplirsen for treatment of DMD.
DMD is a rare neuromuscular disorder that causes progressive muscle loss in young boys,
leading to severe disability and premature death. The disease is the result of a genetic mutation
that causes the dystrophin gene to make inadequate amounts of dystrophin, a protein that plays a
key structural role in muscle fiber function and is needed to keep muscles intact. DMD occurs in
about one in every 3,500 boys worldwide. See Compl. ¶¶ 4, 33-34. The disease is universally
fatal, and the average life expectancy of someone with DMD is only 27 years. Id. ¶¶ 34-35.
Currently, there are no approved disease-modifying therapies to treat DMD. Id. ¶ 35.
Sarepta, a biopharmaceutical company, is currently developing drug candidates to treat
DMD, including its leading candidate, eteplirsen. Sarepta’s main competitor in the field is
Prosena Therapeutics, Inc. (“Prosena”), who was also developing a drug candidate to treat DMD.
During the Class Period, Prosena, like Sarepta, was undertaking clinical trials and actively
pursuing regulatory approval in the United States and Europe. Id. ¶ 37. Plaintiffs allege that
Sarepta and Prosena were competing to win first regulatory approval for their respective DMD
drugs, and thereby claim a “first-mover advantage” in the DMD drug market. Id. ¶ 38.

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B. FDA’s New Drug Application Process
Under the Federal Food, Drug, and Cosmetic Act, all “new drugs” must be approved by
the FDA before they may be marketed in the United States. See 21 U.S.C. § 355(a). The FDA
approves new drugs through the “New Drug Application” process, in which the sponsor of the
drug must demonstrate that it has carried out studies sufficient to show that the drug is safe and
effective for its intended use. Compl. ¶¶ 42-44. First, sponsors must produce results of
preclinical testing in laboratory animals, and thereafter present an Investigational New Drug
application (“IND”). The IND outlines, among other things, the sponsor’s proposal for future
clinical trials in humans. Id. ¶ 44. Human clinical trials can begin only after an IND is approved
by the FDA and a local Institutional Review Board (“IRB”). Id. ¶ 45.
Human clinical trials are typically conducted in three phases. Phase I studies are usually
conducted in healthy volunteers and focus on the safety of the drug. If Phase I studies do not
indicate unacceptable toxicity, the drug moves on to Phase II studies, which obtain preliminary
data on whether the drug is effective in treating people for a certain disease or condition. If the
Phase II studies suggest evidence of efficacy, the drug moves into Phase III studies, which are
intended to gather more information on safety and efficacy by studying the drug across a larger
number of participants. Id. ¶ 46.
When a sponsor believes it has conducted sufficient clinical trials, and that those trials
demonstrate substantial evidence of efficacy and safety, the sponsor may prepare and submit an
NDA, seeking the FDA’s approval to market the drug for the treatment of a specific condition or
indication. Id. ¶ 49. After an NDA is submitted, the FDA has 60 days to decide whether to accept
it for filing and proceed with a review. Id. ¶ 52; see 21 C.F.R. § 314.101(a)(1). If the FDA
concludes that the application is “sufficiently complete to permit a substantive review,” the NDA

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will be accepted, and the FDA will proceed to review the application. 21 C.F.R. § 314.101(a)(1);
see also Compl. ¶ 52.
An FDA review team of medical doctors, scientists, and other experts evaluates whether
the sponsor’s studies show that the drug is safe and effective for its proposed use. Compl. ¶ 58.
In addition, the acceptance of an NDA triggers certain deadlines under the Prescription Drug
User Fee Act, which requires the FDA to make a determination within 10 months, or within 6
months for certain “priority drugs.” Id. ¶ 52. By the end of the review period, the FDA will either
approve the NDA or issue a Complete Response Letter. Id. ¶ 61.
The FDA has various programs that allow for the drug approval process to be expedited,
to ensure that therapies for serious conditions are available as soon as possible. Id. ¶ 62. One
such program is “Fast Track” designation. Id. ¶ 64. Fast Track designation may be granted on the
basis of preclinical data, and the sponsor of a drug that receives Fast Track status will typically
have more frequent interactions with the FDA during drug development. Id. The FDA granted
eteplirsen Fast Track designation in 2007. See Sarepta Therapeutics, Inc. FY2013 10-K [ECF
No. 23-1] (“FY2013 10-K”), p. 8. 2
Drugs with certain Fast Track designations can also obtain a “rolling review” of an NDA
application, such that certain segments of the NDA can be submitted piecemeal, instead of in one
single submission. Compl. ¶¶ 53-55, 64. Plaintiffs’ Complaint alleges that in this case, the FDA
“expressed a willingness” to conduct a rolling review of Sarepta’s NDA for eteplirsen. Id. ¶ 102.
The FDA, however, considers an NDA to be “complete” only when the last segment of the NDA
is submitted to the FDA for review. Id. ¶¶ 55, 102.

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All page numbers referenced in this Memorandum and Opinion refer to page numbers assigned
by the Court’s ECF filing system.
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Additionally, drug sponsors may seek Accelerated Approval (“AA”), which can also
reduce the length of time necessary to complete clinical studies. Id. ¶ 65. AA allows approval of
a drug that demonstrates an effect on a “surrogate endpoint” that is reasonably likely to predict
clinical benefit, or on a “clinical endpoint” that can be measured earlier than an effect on
irreversible morbidity or mortality, and that is reasonably likely to predict an effect on those
endpoints, or to produce some other clinical benefit. Id.
C. Eteplirsen Clinical Trials
In 2011, after completing Phase I and II studies for eteplirsen overseas, Sarepta initiated a
Phase IIb clinical trial in the United States to measure eteplirsen’s ability to meet both a “primary
efficacy” surrogate endpoint (i.e., increased production of dystrophin) and a clinical endpoint
(i.e., a patient’s retained capacity to walk despite the passage of time, referred to as the “6minute walk test”). See FY2013 10-K, pp. 8-9.
The first phase of the Phase IIb clinical trial, which was referred to as “Study 201,”
studied the effects of eteplirsen “administered intravenously in two different doses over 24
weeks for the treatment of ambulant boys with DMD.” Id. p. 8. Study 201 included 12
participants, all of whom underwent muscle biopsies both prior to starting treatment, and again
after 24 weeks of treatment with either eteplirsen or a placebo. Id. The comparative biopsies
were designed to determine the amount of dystrophin in the patient’s muscle tissue, and whether
the amount of dystrophin had changed over time. See Compl. ¶ 82. Dystrophin protein can be
visualized by staining the muscle sample with a special dye. Id. Plaintiffs allege that this method,
which requires an expert to view and analyze slides of muscle tissue, is “inherently subjective.”
Id.

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After Sarepta reported encouraging results from Study 201, the participants were then
enrolled in an extension study (“Study 202”), in which all participants would receive varying
doses of eteplirsen for an additional 24 weeks. See FY2013 10-K, p. 9. At week 48, a third
biopsy would be obtained for analysis. See id. For Study 202, the “primary efficacy endpoint”
was a change in dystrophin-positive muscle fibers in the biopsy tissue from baseline to week 48.
Id. The “primary clinical outcome measure” was the change in a patient’s performance in the
“six minute walk test” from baseline to week 48. Id. Study 202 was subsequently extended to
include a “long term extension phase,” in which patients would continue to be followed for
safety and clinical outcomes approximately every 12 weeks. Id.
During the Class Period, all of Sarepta’s muscle biopsy dystrophin analyses were
conducted at a single location, at Nationwide Children’s Hospital in Columbus, Ohio, and the
clinical review was overseen by one medical doctor. Compl. ¶ 83. Plaintiffs allege that
throughout the Class Period, the FDA was in possession of all of Sarepta’s dystrophin data. Id. ¶
84.
D. Events during the Class Period
On April 21, 2014, at the beginning of the Class Period, Sarepta issued a press release
announcing that by the end of 2014, it planned to submit an NDA to the FDA for the approval of
eteplirsen as a treatment for DMD. Compl. ¶ 6. According to the Company, the timing of its
NDA submission was “based on a guidance letter from the FDA that proposed a strategy
regarding the submission of its NDA for eteplirsen under a potential Accelerated Approval
pathway.” Id.; see also Sarepta Therapeutics, Inc. Form 8-K, dated April 21, 2014 [ECF No. 237] (“4/21/2014 8-K”), p. 6. In its press release, the Company quoted from portions of the FDA’s
guidance letter, noting that the FDA had “stated that ‘with additional data to support the efficacy

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and safety of eteplirsen for the treatment of DMD, an NDA should be fileable,’” and that the
FDA had “outlined examples of additional data and analysis that, if positive, will be important to
enhance the acceptability of an NDA filing by addressing areas of ongoing concern in the
dataset.” 4/21/2014 8-K, p. 6; see also Compl. ¶ 92. Sarepta’s press release, however, also
disclosed that the FDA had “expressed concerns about methodological problems in the
assessments of dystrophin and, ‘remain[s] skeptical about the persuasiveness of the (dystrophin)
data.’” 4/21/2014 8-K, p. 8 (quoting FDA guidance letter) (alteration added). Sarepta noted that,
as a result, the FDA WAS “‘uncertain whether the existing dystrophin biomarker data will be
persuasive enough to serve as a surrogate endpoint . . . .’” Id.
On the same day, the Company held a conference call with analysts and investors to
discuss Sarepta’s announcement. See Sarepta Conference Call Transcript dated April 21, 2014
[ECF No. 23-8] (“4/21/2014 Conference Call”), p. 4. On the call, Defendant Garabedian,
Sarepta’s CEO, explained that between November 2013 and April 2014, Sarepta had attended
four meetings with the FDA, and that the FDA’s newest guidance letter served as the “final
meeting minutes” for those interactions. See id., p. 4. Garabedian stated that the FDA’s letter
provided “clear direction” to “help move our DMD program forward,” and that Sarepta “now
understand[s] how the FDA suggests that we enhance our existing data set over the short term, to
increase their confidence in our data, and increase the likelihood of an acceptable NDA filing,
and a potentially favorable review for an accelerated approval of eteplirsen.” Id.
Garabedian explained that the FDA’s guidance letter set forth two alternative pathways to
achieve accelerated approval of eteplirsen. See id., p. 5. The first approach, as described by
Garabedian, “would be to grant eteplirsen an accelerated approval on the clinical data from our
Study 201/202 study, based on the 6-minute walk test results, as an intermediate clinical

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endpoint.” Id. “The second approach,” he continued, “would be to grant eteplirsen an accelerated
approval on the dystrophin biomarker as a surrogate endpoint . . . .” Id. Garabedian went on to
note that “[w]ith respect to [using] dystrophin as a surrogate endpoint to support accelerated
approval, the FDA indicated that it will collaborate with Sarepta to conduct a detailed review of
the current dystrophin biomarker data from our Phase II study. If the results of the review were
deemed adequate, it may support accelerated approval.” Id. “To this end, over the coming
months, the FDA will be meeting with the pathologist that supervised the dystrophin
quantification, to better understand the blinded review, the detailed methodologies, and the
controlled conditions in which the various dystrophin measures were conducted.” Id., pp. 5-6.
During the call, Garabedian also stated that “[w]hile we continue to believe that our
current dataset is strong enough on its own to be considered for an NDA filing, we believe the
additional data that we will collect over the next six to eight months, if positive, will provide the
FDA with supporting evidence of eteplirsen’s safety and efficacy, that should result in an
acceptable NDA for filing.” Id., p. 4; see also Compl. ¶ 7.
Later in the call, Defendant Kaye reiterated that the Company “still believe[d]” that its
existing dataset was “strong enough to support an NDA filing and is worthy of a review for a
potential accelerated approval,” and that the Company “could submit a NDA now.” Compl. ¶¶ 7,
96; see also 4/21/2014 Conference Call, p. 12. 3
After Sarepta’s announcement, shares of Sarepta increased 39.26%, to close at $33.98 per
share on April 21, 2014, on unusually heavy trading volume. Compl. ¶ 8. The next day, Sarepta
disclosed that it planned to offer up to $100 million of its common stock in an underwritten

3

Although the Complaint attributes these statements to Kaye, the transcript of the Conference
Call indicates that it was Garabedian who spoke. For purposes of Defendants’ Motion to
Dismiss, however, the Court will accept Plaintiffs’ allegation regarding Kaye at face value.
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public offering. Id. ¶ 9. On April 29, 2014, Sarepta sold 2,650,000 shares of common stock in a
public offering, at a price of $38.00 per share, resulting in net proceeds to the Company of
approximately $94.5 million. Id. ¶ 10.
In May 2014, the FDA visited National Children’s Hospital in Columbus and reviewed
Sarepta’s clinical trial site and protocols. Id. ¶ 86. Plaintiffs allege that two months later, in July
2014, Sarepta received a “request for a reassessment” from the FDA, which asked that Sarepta’s
primary dystrophin data be reassessed by “independent pathologists at independent labs.” Id. ¶
13. Defendants did not disclose this specific information to the public during the Class Period.
Id.
On October 27, 2014, Sarepta issued another press release announcing that the Company
had received a “regulatory update” from the FDA regarding its planned NDA submission for
eteplirsen. Id. ¶ 14; see also Sarepta Therapeutics, Inc. Form 8-K dated October 27, 2014 [ECF
No. 23-6] (“10/27/2014 8-K”), p. 3. Specifically, Sarepta stated that the FDA “provided updated
guidance regarding the specific data to be included as part of, or at the time of, Sarepta’s NDA
submission.” 10/27/2014 8-K, p. 6. The updated guidance, as reported by Sarepta, “states that
additional data are now required as part of the NDA submission including the results from an
independent assessment of dystrophin images and the 168-week clinical data from study 202.”
Id. It also “requests more specific data including a minimum duration of safety in new patients
exposed to eteplirsen, patient-level natural history data to be obtained by Sarepta from
independent academic institutions, and MRI data from a recent study conducted by an
independent academic group.” Id. Sarepta’s press release went on to note that, based on the
FDA’s “updated guidance,” Sarepta would not submit an NDA until mid-year 2015. 10/27/2014
8-K, p. 6; see also Compl. ¶¶ 14, 88.

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Also on October 27, 2014, Sarepta executives participated in a conference call, during
which Defendant Kaye confirmed that one of the concerns raised by the FDA was that all of
Sarepta’s dystrophin testing had taken place at a single site. He noted that this concern would be
addressed, at least in part, by having more than one pathologist review the dystrophin slides that
would be produced by a forthcoming, fourth biopsy. See Compl. ¶ 14; see also Sarepta
Conference Call Transcript dated October 27, 2014 [ECF No. 23-22] (“10/27/2014 Conf. Call”),
p. 7.
After the Company’s October 27, 2014 announcement, shares of Sarepta declined $7.65
per share, or more than 32%, to close at $15.91 per share on October 27, 2014, on unusually
heavy trading volume. Compl. ¶ 15.
Three days later, on October 30, 2014 the FDA issued a public “Duchenne Muscular
Dystrophy Statement,” in which it addressed “questions the agency has received from DMD
patients, their families, and others in the community who are concerned about the timing of the
filing of an NDA for eteplirsen.” Id. ¶ 133. Because Plaintiffs rely heavily on the FDA’s October
30, 2014 Statement to support their allegations that Defendants’ prior representations were false
and misleading, the Court sets out the FDA’s Statement in its entirety:
FDA recognizes the unmet medical need in Duchenne muscular dystrophy (DMD),
the devastating nature of the disease for patients and their families, and the urgency
to make new treatments available. We remain committed to working with all
companies to expedite the development and approval of safe and effective drugs to
treat this disease.
On October 27, 2014, Sarepta Therapeutics released a statement and had a
conference call regarding guidance received from FDA in a September 2014
meeting regarding its planned New Drug Application (NDA) for eteplirsen, to treat
patients with DMD. To the extent allowed by laws restricting release of confidential
information about experimental drugs, FDA is addressing questions the agency has
received from DMD patients, their families, and others in the community who are
concerned about the timing of the filing of an NDA for eteplirsen.

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Over the past several years, FDA has worked extensively with Sarepta on the
development of eteplirsen, and provided guidance with respect to the data that
would be necessary to determine whether it is effective and support filing of an
NDA. Following a meeting with FDA last April, Sarepta announced on April 21,
2014, that “with additional data to support the efficacy and safety of eteplirsen for
the treatment of DMD, an NDA should be fileable.” Sarepta also announced at that
time that FDA had communicated that there were areas of concern in the existing
database, and that FDA had provided Sarepta with “examples of additional data and
analyses that, if positive, would be important to enhance the acceptability of an
NDA filing….” Sarepta announced at the time its plans to submit an NDA for
eteplirsen by the end of 2014.
Since the April 2014 meeting, FDA has been working intensively to help Sarepta
provide the additional data and analyses needed to support an NDA. FDA
understands the considerable disappointment in the Duchenne community
following Sarepta’s October 27 announcement that the previous time frame for
submitting the NDA for eteplirsen cannot be met.
In its advice to Sarepta, FDA has consistently stated that it would be necessary to
include data in its NDA demonstrating that eteplirsen increases production of the
muscle protein dystrophin. (Eteplirsen’s proposed mechanism of action is through
increasing production of this muscle protein.) As described by Sarepta in its
October 27 statement, the need for additional data and analyses to support the NDA
was reinforced by an FDA inspection of the clinical site where dystrophin analyses
had been conducted. It is important to note that the agency did not find any evidence
of fraud at this site, as has been perceived by some. FDA is concerned that the
methods used to measure dystrophin were not adequately robust to support an NDA
submission. Thus, FDA provided Sarepta with detailed recommendations on how
to improve these dystrophin analyses, and FDA’s most recent advice was consistent
with the advice provided after the April 2014 meeting.
FDA has also been consistent in its guidance to Sarepta that it would be necessary
to submit data from the ongoing open-label trial of eteplirsen (Study 202) in an
NDA, along with data from natural history studies that could show that patients
treated with eteplirsen experienced slower decline in physical function. FDA has
worked closely with Sarepta in efforts to obtain these natural history data from
investigators.
FDA has consistently advised Sarepta that data from additional patients, beyond
the patients included in Study 202, would be critical to our assessment of the safety
and efficacy of eteplirsen. In our April 2014 letter to Sarepta, FDA strongly
encouraged Sarepta to begin enrollment of new patients as soon as possible.
FDA has expressed willingness to conduct a “rolling review” of Sarepta’s NDA.
Under a rolling review, companies can submit, and FDA can review, portions of an
application as they are completed. Once submission of all components is complete,

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the review clock begins. FDA expects the NDA for eteplirsen will qualify for a
priority review.
FDA also plans to present the NDA for eteplirsen to a public advisory committee
meeting before making a decision on approval. This will afford FDA the ability to
gain advice from outside experts and interested stakeholders on the adequacy of the
data to support approval, including the possibility of “accelerated approval” – a
mechanism to approve drugs in particular situations prior to the availability of
definitive evidence of effectiveness.
FDA understands the dire urgency of the situation and the importance of our actions
to the DMD community. FDA will continue to work with Sarepta in their efforts to
provide the data it considers critical to FDA’s ability to review the NDA and reach
a decision on approvability.
Compl. ¶ 133.
E. Alleged Misrepresentations
Plaintiffs’ Complaint alleges that during the Class Period, Defendants made a number of
false and misleading statements and omissions regarding the sufficiency of Sarepta’s existing
dystrophin data. 4 Plaintiffs contend that “[t]hroughout the Class Period, Defendants were aware
that the FDA had requested additional data to support the efficacy and safety of eteplirsen for an
NDA to be fileable.” Compl. ¶ 118. Despite this alleged knowledge, Defendants “falsely”

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The Complaint also alleged a second category of misstatements, namely, representations that
the FDA would be willing to accept additional clinical data from Sarepta after the Company
submitted its NDA. Plaintiffs’ theory was based on the assumption that a drug sponsor must
obtain advance written permission from the FDA to submit material, required portions of its
NDA after the initial submission. See Compl. ¶ 101. Plaintiffs asserted that because the FDA
never gave Sarepta written permission to make any late submissions, Defendants’ representations
that the FDA had expressed a willingness to accept supplemental data after Sarepta’s NDA filing
were false and misleading. See Compl. ¶ 102. In their Motion to Dismiss, Defendants argued that
this theory was based upon the false premise that advance permission was required, and that
Plaintiffs’ claims should therefore be dismissed to the extent they relied on this theory. Plaintiffs,
in their Opposition, did not spill much ink addressing Defendants’ argument on this front. At the
March 29, 2016 hearing before the Court, Plaintiffs’ counsel acknowledged that Plaintiffs do not
intend to pursue securities fraud claims based on this theory. Accordingly, the Court need not
recite the Complaint’s allegations on this point, and Defendants’ Motion to Dismiss is
ALLOWED with regard to the alleged misstatements set forth in ¶¶ 101-117 of Plaintiffs’
Amended Complaint.
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claimed that the Company’s existing dystrophin data was sufficient to file a NDA. Id. Plaintiffs
further allege that the falsity of these statements was revealed when the FDA issued its
Duchenne Muscular Dystrophy Statement on October 30, 2014, in which it explained that in its
advice to Sarepta, the FDA “has consistently stated that it would be necessary to include data in
its NDA demonstrating that eteplirsen increases production of the muscle protein dystrophin,”
and that “[a]s described by Sarepta in its October 27 statement, the need for additional data and
analyses to support the NDA was reinforced by an FDA inspection of the clinical site where
dystrophin analyses had been conducted.” Id. The FDA also noted that after the clinical site
inspection, the FDA “provided Sarepta with detailed recommendations on how to improve these
dystrophin analyses,” and that the FDA’s “most recent advice was consistent with the advice
provided after the April 2014 meeting.” Id.
Plaintiffs point to four specific statements made during the Class Period that they claim
were false and misleading. First, during the April 21, 2014 conference call with Sarepta’s investors
and analysts, Garabedian stated that:
[t]he way to think about it is almost like a sliding scale. We could
submit our NDA now on the existing data set, but the FDA has
highlighted questions and concerns, and they are not as comfortable
with just the existing data set. We hear them, and while we could
submit an NDA now, we believe that we are going to be in a much
better position if we just wait for some of these additional pieces of
data.
Compl. ¶ 119; see also 4/21/2014 Conference Call p. 12.
Second, during a May 7, 2014 Deutsche Bank Healthcare Conference, Garabedian made
similar statements, indicating that the FDA had provided guidance that an NDA:
should be fileable with additional safety and efficacy, but when they
describe all the different ways that we could supplement that
additional safety and efficacy, and I would also add perspectives on
the current data set, they really looked – they gave us almost a
sliding scale of saying there are many ways that you can bolster the
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current data set. I’m paraphrasing here, but they didn’t say we’re not
telling you can’t submit an NDA tomorrow on the existing data set.
We’re not saying it wouldn’t be fileable on the current data set. But
we’re telling you that we’ve raised enough concerns on the existing
data set that you would bolster your case for an NDA filing and
potentially a favorable review if you allow us to do a more detailed
review of your dystrophin methodology, if you maybe consider
getting a fourth biopsy, if you add exposure data from the new
patients that are enrolled in the confirmatory study, if you
supplement it with the 144-week data.
Transcript of Sarepta Therapeutics, Inc. at Deutsche Bank Healthcare Conference dated May 7,
2014 [ECF No. 23-9] (“5/7/2014 Deutsche Bank Healthcare Conference”) p. 3; see also Compl. ¶
122.
Third, during the May 13, 2014 Bank of America Health Care Conference, Garabedian
stated that the FDA, in its communications with Sarepta, had indicated that:
the existing dystrophin data set could be sufficient on its own to
qualify for accelerated approval, particularly after a collaboration
with the company to go through a detailed review of exactly what
was done to generate that data set. So that means they have the data,
they have all of the methodologies that we’ve used to conduct the
analysis, but they’ve not yet gone and actually talked to the pediatric
neurologist in charge of the histopathology lab. They’ve not talked
to the reviewers, they’ve not talked to the technicians, they did not
completely understand how did we control for this analysis? What
conditions was ensuring the quality of this analysis? How was the
blinded review handled? We are very confident in the site we
selected and the entire staff who led the dystrophin analysis. I
believe they’re world-class, and we think once the FDA meets this
team and understands exactly how it was done, they will have the
same confidence we have in our existing dystrophin data set.
Transcript of Sarepta Therapeutics, Inc. at Bank of America Merrill Lynch Healthcare
Conference dated May 13, 2014 [ECF No. 23-11] (“5/13/2014 BofA Healthcare Conference”) p.
4; see also Compl. ¶ 125.
Finally, during Sarepta’s August 7, 2014 Earnings Conference Call with investors and
analysts, Garabedian noted that:

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we continue to have productive dialogue with the FDA regarding
our dystrophin methodology. As a reminder, the FDA indicated in
its April guidance that if, after further detailed review, they were to
find the currently available dystrophin biomarker data to be
adequate, our existing dystrophin data set would have the potential
to support accelerated approval. The agency recently completed a
site visit with Nationwide Children’s Hospital in Columbus, Ohio
and met with the leadership and staff of the histopathology lab that
conducted our dystrophin analysis and quantification and we
continue to work with the FDA to provide greater assurance of the
quality and reliability of our dystrophin data in anticipation of a
potential NDA filing decision and potential NDA review next year.
Q2 2014 Sarepta Therapeutics Inc. Earnings Call dated August 7, 2014 [ECF No. 23-27]
(“8/7/2014 Conference Call”) p. 6; see also Compl. ¶ 128.
Plaintiffs allege that each of these statements was materially false or misleading when
made, or omitted to state facts necessary to make the statements not misleading, because the
FDA had already informed Sarepta that its existing dystrophin data was insufficient, and that the
methods used to measure dystrophin were not adequately robust to support an NDA submission.
See Compl. ¶ 129. Further, Plaintiffs allege that Garabedian’s August 7, 2014 statements were
materially misleading for an additional reason: namely, in July 2014, Defendants had received a
request from the FDA for reassessment of Sarepta’s primary dystrophin endpoint data by
independent pathologists at independent labs. Id.
F. Scienter
Plaintiffs further allege that Defendants made these allegedly false and misleading
statements with scienter, and they point to several allegations from which they claim scienter
may be inferred. First, Plaintiffs allege that the individual Defendants, including Garabedian,
“actively communicated with the FDA and were present during the Company’s interactions with
the FDA.” Compl. ¶ 105(a). Thus, to the extent that Defendants’ representations to the public
misstated the guidance provided by the FDA, Plaintiffs contend that Defendants’ firsthand

16

knowledge of the actual guidance supports an inference of scienter. Second, Plaintiffs note that
although Sarepta has released numerous statements paraphrasing the FDA’s purported April
2014 guidance, the Company has not made the full text of the FDA’s “guidance letter” publicly
available. Id. ¶ 105(d). Because these communications are potentially exculpatory, Plaintiffs
argue that Defendants’ failure to release them “supports a strong inference of scienter.” Id.
With respect to the allegedly false and misleading statements made during Sarepta’s
April 21, 2014 conference call with investors and analysts, Plaintiffs say scienter may be inferred
because the Defendants’ alleged misstatements “led to an immediate and drastic increase in the
price of the Company’s shares, which the Company capitalized on by announcing a public
offering of its stock the next day.” Compl. ¶¶ 105(c), 121(c). Thus, Plaintiffs allege that the
timing of the April 21st statements, relative to the Company’s initial public offering, also
supports an inference of scienter.
Finally, with respect to the allegedly false and misleading statements made during
Sarepta’s August 7, 2014 conference call with investors and analysts, Plaintiffs allege that
scienter may be inferred from the fact that Sarepta had received the FDA’s request for
reassessment of its dystrophin data no later than July 2014. See Compl. ¶ 130. Thus, Defendants
had “specific knowledge, or were reckless in not knowing, that Sarepta’s dystrophin data were
insufficient to file an NDA.” Id. ¶ 130(a).
III.

PLAINTIFFS’ MOTION TO STRIKE
The Court first addresses Plaintiffs’ Motion to Strike ten exhibits 5 attached to the

Declaration of Mark D. Vaughn [ECF No. 23] (“Vaughn Decl.”) which Defendants submitted in

5

Specifically, Plaintiffs move to strike Exhibits 2, 3, 4, 16, 17, 18, 19, 21, 23, and 24 to the
Vaughn Declaration.
17

support of their Motion to Dismiss the Amended Complaint. Plaintiffs also move to strike
Exhibit A to Defendants’ Memorandum of Law in Support of their Motion to Dismiss [ECF No.
22], which is a reference chart cataloguing the purported pleading deficiencies in Plaintiffs’
Amended Complaint.
The Court DENIES Plaintiffs’ Motion to Strike the chart in Exhibit A to Defendants’
Memorandum of Law. Although the better course would have been for Defendants to seek leave
to file excess pages in advance of the filing, the Court would have allowed a motion to that
effect. Further, the chart does not introduce any new arguments, and the Court finds Defendants’
efforts to synthesize the information presented in their moving papers to be useful.
Plaintiffs’ Motion to Strike exhibits to the Vaughn Declaration is ALLOWED with
respect to Exhibits 2, 3, 16, 17, 18, 19, 21, and 23, but DENIED with respect to Exhibits 4 and
24. As Defendants note, most of the disputed exhibits merely provide background information
regarding Sarepta’s ongoing efforts to develop a DMD drug candidate. Although these exhibits
may have provided helpful context, they are not properly before the Court, nor are they essential
to evaluating the sufficiency of the Complaint. Therefore, the Court will allow the motion to
strike Exhibits 2, 3, 16, 17, 18, 19, 21, and 23 and has not considered these exhibits in ruling
upon Defendants’ Motion to Dismiss.
Defendants, however, argue that Exhibits 4 and 24 to the Vaughn Declaration provide
more than mere context and relate directly to Plaintiffs’ theory of the case.
Exhibit 4 is a copy of the FDA’s official response to a citizen petition urging the FDA to
“Say YES to Accelerated Approval for safe, effective therapies for children with Duchenne
[muscular dystrophy].” See Vaughn Decl. ¶ 6. The FDA’s response, which is signed by Janet
Woodcock, Director of the FDA Center for Drug Evaluation and Research, appears to have been

18

published on the official White House website on July 29, 2014. See Vaughn Decl. Ex. 4, [ECF
No. 23-4] (“Woodcock Statement”). 6 In her statement, Woodcock acknowledges the petitioners’
concerns about the lack of FDA-approved therapies to treat DMD and states that the FDA
“share[s] your sense of urgency to make safe and effective drugs available for patients with
Duchenne muscular dystrophy as soon as possible.” Id. The statement goes on to note that the
FDA is “actively engaged with a number of drug companies focused on developing new drugs
for [DMD], including Sarepta . . . .” Id. Woodcock also states that the FDA is conducting
“ongoing analyses of eteplirsen and other drugs for the treatment of [DMD],” and that while
those assessments are “rigorous and extensive,” the FDA “recognize[s] the urgency of the needs
of patients with [DMD].” Id. The Woodcock Statement further notes that Sarepta “has publicly
announced its intention to file a New Drug Application for eteplirsen by the end of 2014 as well
as plans to initiate several additional clinical studies with eteplirsen later this year[.]” Id. The
Statement assures petitioners that the FDA is “willing to explore the use of all potential pathways
for the approval of drugs for [DMD] (including accelerated approval) as appropriate.” Id.
Plaintiffs do not dispute the authenticity of the Woodcock Statement. Rather, they move
to strike it on relevance grounds, arguing that “it is unclear how a response to an anonymous
petition bears relevance to the allegations in the Complaint.” [ECF No. 27 p. 15]. Defendants,
however, insist that the Woodcock Statement is not only relevant, but central to Plaintiffs’
claims, as it represents the FDA’s “lone public statement” during the Class Period that addresses
the prospective timing of Sarepta’s NDA filing for eteplirsen.

6

As of the date of this Memorandum and Order, the FDA’s July 29, 2014 Response is still
available on the White House website. See
https://petitions.whitehouse.gov/response/drug-approval-pathways-and-duchenne-musculardystrophy, last visited March 31, 2016.
19

The Court agrees with Defendants and denies the motion to strike Exhibit 4. “Ordinarily .
. . any consideration of documents not attached to the complaint, or not expressly incorporated
therein, is forbidden, unless the proceeding is properly converted into one for summary judgment
under Rule 56.” Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993). The First Circuit recognizes
“narrow exceptions” to this rule for “documents the authenticity of which are not disputed by the
parties; for official public records; for documents central to the plaintiffs’ claim; or for
documents sufficiently referred to in the complaint.” Id.
Where, as here, Plaintiffs do not dispute the authenticity of the Woodcock Statement, it is
appropriate for the Court to consider this document on Defendants’ Motion to Dismiss. See id.
The Court also finds that the Woodcock Statement, insofar as it is an official statement of the
FDA, and published on a government website, constitutes a “public record” of which the Court
may take judicial notice. See Gent v. CUNA Mut. Ins. Soc’y, 611 F.3d 79, 84 n.5 (1st Cir. 2010)
(taking judicial notice of relevant facts provided on CDC website, which were “not subject to
reasonable dispute”) (citing Fed. R. Evid. 201); Rock v. Lifeline Sys. Co., No. CIV.A. 13-11833MBB, 2014 WL 1652613, at *12 (D. Mass. Apr. 22, 2014) (court may take judicial notice and
consider documents posted on a government website); Denius v. Dunlap, 330 F.3d 919, 926-27
(7th Cir. 2003) (holding that court abused its discretion in withdrawing its judicial notice of
information posted on official government website).
Furthermore, although the July 29, 2014 Woodcock Statement is not referenced in the
Complaint, Plaintiffs do rely on the FDA’s subsequent October 30, 2014 Statement regarding
eteplirsen and Sarepta. Specifically, Plaintiffs argue that the FDA’s October 2014 Statement
“refuted” Sarepta’s earlier representations to the investing public, “further demonstrating the
falsity of Defendants’ disclosures during the Class Period.” [ECF No. 25 p. 12]. Because the

20

FDA’s October 30, 2014 statement is central to Plaintiffs’ allegations, the Court believes that
other public comments from the FDA during the Class Period should also be considered on a
motion to dismiss. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)
(directing courts to consider, on motions to dismiss securities fraud claims, “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”). Although the Court is not considering the
FDA’s statements for the truth of the matter asserted, the mere existence of such statements may
be relevant to the allegedly misleading nature of Defendants’ representations and omissions;
whether Defendants acted with the requisite scienter; and the total mix of information available
to the market during the Class Period. See In re Nuvelo, Inc. Sec. Litig., 668 F. Supp. 2d 1217,
1220 (N.D. Cal. 2009). For all of these reasons, the Court denies Plaintiffs’ Motion to Strike
Exhibit 4 to the Vaughn Declaration and will consider Exhibit 4 for purposes of Defendants’
Motion to Dismiss.
Plaintiffs also move to strike Exhibit 24, which is a “Notice of Recent Developments”
filed by different plaintiffs in a separate securities fraud action against Sarepta and the individual
Defendants. See Vaughn Decl. Ex. 24 [ECF No. 23-24]. That action is also pending in this
District. See Corban v. Sarepta Therapeutics, Inc., et al., No. 1:14-cv-10201-IT (D. Mass.).
Although it is “well-accepted that federal courts may take judicial notice of proceedings in other
courts if those proceedings have relevance to the matters at hand,” Kowalski v. Gagne, 914 F.2d
299, 305 (1st Cir. 1990), it is not clear how the Notice attached at Exhibit 24, or the Corban case
more generally, are relevant to determining whether Plaintiffs’ Complaint in this action states a
viable claim. Notably, the securities fraud claims in Corban involve a different class period, and

21

are based on different alleged misstatements and omissions than those at issue here. See
generally Corban v. Sarepta Therapeutics, Inc., No. 14-CV-10201-IT, 2015 WL 1505693, at *1 *3 (D. Mass. Mar. 31, 2015). Accordingly, although the Court declines to strike Exhibit 24 to the
Vaughn Declaration, it has not relied upon this exhibit for purposes of Defendants’ Motion to
Dismiss.
Finally, the Court notes that Plaintiffs have not moved to strike Exhibits 1, 5-15, 20, 22,
or 25-27 to the Vaughn Declaration, which include copies of the various press releases, public
filings, and transcripts containing the alleged misstatements referred to in the Complaint.
Accordingly, the Court has considered these exhibits for purposes of Defendants’ Motion to
Dismiss – not for the truth of the matters asserted therein – but to determine the full content of
Defendants’ statements, and the context in which Defendants made them. See Shaw v. Dig.
Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996) (court may “properly consider the relevant
entirety of a document integral to or explicitly relied upon in the complaint . . . without
converting the motion into one for summary judgment”).
IV.

DEFENDANTS’ MOTION TO DISMISS
A. Legal Standard
“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))
(alterations and omission in original). In turn, SEC Rule 10b–5 implements § 10(b) by declaring
it unlawful, “in connection with the purchase or sale of any security,”

22

(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.
17 C.F.R. § 240.10b–5.
Thus, “[t]o state a claim for securities fraud under Section 10(b), a plaintiff must allege:
(1) a material misrepresentation or omission; (2) scienter, or a wrongful state of mind; (3) in
connection with the purchase or sale of a security; (4) reliance; (5) economic loss; and (6) loss
causation.” Fire & Police Pension Ass’n of Colorado v. Abiomed, Inc., 778 F.3d 228, 240 (1st
Cir. 2015) (internal quotations and citation omitted). 7
As with any motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must accept all
“well-pleaded factual allegations in the Complaint as true and view all reasonable inferences in
the plaintiffs’ favor.” ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008). To
survive a motion to dismiss, the complaint must contain “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

7

“Claims brought under section 20(a) of the Securities Exchange Act, 15 U.S.C. § 78t(a), are
derivative of 10b – 5 claims.” Hill v. Gozani, 638 F.3d 40, 53 (1st Cir. 2011). Section 20(a)
provides that once a company has been found to have violated the Act’s substantive provisions,
“[e]very person who, directly or indirectly, controls” the company “shall also be liable jointly
and severally with and to the same extent as [the company] . . . unless the controlling person
acted in good faith and did not directly or indirectly induce the act or acts constituting the
violation or cause of action.” 15 U.S.C. § 78t(a). Here, Plaintiffs allege Section 20(a) claims
against the individual Defendants on the grounds that they had “direct and supervisory
involvement in the day-to-day operations of the Company,” and are therefore “presumed to have
had the power to control or influence the particular transactions giving rise to the securities
violations” alleged in the Complaint. See Compl. ¶ 180. Accordingly, in order to plead a viable
Section 20(a) claim against the individual Defendants, Plaintiffs must first plead an actionable
claim under Section 10(b) of the Exchange Act and Rule 10b-5.

23

Further, because this case involves claims of securities fraud, Plaintiffs must additionally
satisfy the Fed. R. Civ. P. 9(b) standard for alleging fraud with particularity, and comply with the
heightened pleading requirements imposed by the Private Securities Litigation Reform Act of
1995 (“PSLRA”), Pub. L. No. 104-67, 109 Stat. 737. See Advest, Inc., 512 F.3d at 58. The
PSLRA “requires plaintiffs’ complaint to ‘specify each statement alleged to have been
misleading [and] the reason or reasons why the statement is misleading.’” Id. (quoting 15 U.S.C.
§ 78u–4(b)(1)) (alteration in original). If plaintiffs’ allegation regarding the statement or
omission “‘is made on information and belief, the complaint must state with particularity all facts
on which that belief is formed.’” Id. (quoting 15 U.S.C. § 78u–4(b)(1)).
The PSLRA also imposes a “rigorous pleading standard” for allegations of scienter,
which is a “‘mental state embracing intent to deceive, manipulate, or defraud.’” Id. (quoting
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12 (1976)). To survive a motion to dismiss, a
complaint must state “with particularity facts giving rise to a ‘strong inference’ that defendants
acted with a conscious intent ‘to deceive or defraud investors by controlling or artificially
affecting the price of securities’ or ‘acted with a high degree of recklessness.’” Abiomed, Inc.,
778 F.3d at 240 (quoting City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Waters
Corp., 632 F.3d 751, 757 (1st Cir. 2011)). The facts alleged must make the inference of scienter
“more than merely plausible or reasonable—it must be cogent and at least as compelling as any
opposing inference of nonfraudulent intent.” Tellabs, Inc., 551 U.S. at 314. “When there are
equally strong inferences for and against scienter, the draw is awarded to the plaintiff.” Waters
Corp., 632 F.3d at 757.
B. Analysis
Defendants argue that the Amended Complaint fails to state an actionable claim for
securities fraud for two primary reasons: (1) Plaintiffs fail to plead any facts plausibly suggesting
24

that Defendants’ statements or omissions were materially false or misleading; and (2) Plaintiffs
do not allege facts sufficient to support a “strong inference” that Defendants acted with scienter. 8
1. Misleading nature of statements or omissions
First, Plaintiffs’ Complaint broadly alleges that throughout the Class Period, Defendants’
expressions of confidence in Sarepta’s existing dystrophin data set were materially false and
misleading – or omitted to state material facts necessary to make them not misleading – because
“the FDA had informed [Sarepta] that its existing dystrophin data was insufficient and that the
methods used to measure dystrophin were not adequately robust to support an NDA submission.”
Compl. ¶ 120. Similarly, Plaintiffs allege that “[t]hroughout the Class Period, Defendants were
aware that the FDA had requested additional data to support the efficacy and safety of eteplirsen
for an NDA to be fileable.” Compl. ¶ 118.
“The plaintiff's factual allegations are ordinarily assumed to be true in passing on the
adequacy of the complaint, which need not plead evidence.” Penalbert-Rosa v. Fortuno-Burset,
631 F.3d 592, 595 (1st Cir. 2011). “But ‘ordinarily’ does not mean ‘always’: some allegations,
while not stating ultimate legal conclusions, are nevertheless so threadbare or speculative that
they fail to cross ‘the line between the conclusory and the factual.’” Id. (quoting Twombly, 550
U.S. at 557 n. 5). For example, this is the case where the “bareness of the factual allegations
makes clear that the plaintiff is merely speculating about the fact alleged and therefore has not

8

Defendants also argue that many of the alleged misstatements are non-actionable statements of
opinion, and/or forward-looking statements protected by the PSLRA’s safe-harbor provisions.
Because the Court concludes that Plaintiffs have not adequately alleged that the statements
omissions were false or misleading, or that Defendants acted with the requisite scienter, it need
not reach this argument.

25

shown that it is plausible that the allegation is true.” Rodriguez-Vives v. P.R. Firefighters Corps.,
743 F.3d 278, 286 (1st Cir. 2014).
Here, the Complaint contains no facts directly supporting Plaintiffs’ contention that at the
start of the Class Period in April 2014, the FDA had already informed Sarepta that its existing
dystrophin data was insufficient to support an NDA. Instead, Plaintiffs suggest that this inference
can reasonably be drawn from the timing, diction, and tone of the FDA’s October 30, 2014
Statement to the DMD community, which followed Sarepta’s announcement that its NDA filing
would be delayed. Specifically, Plaintiffs point to the FDA’s October 30, 2014 statement that
“[i]n its advice to Sarepta, FDA has consistently stated that it would be necessary to include data
in its NDA demonstrating that eteplirsen increases production of . . . dystrophin,” and that “the
need for additional data and analyses to support the NDA was reinforced by an FDA inspection
of the clinical site where dystrophin analyses had been conducted.” (emphasis added). The FDA
also stated that following this site visit, it had “provided Sarepta with detailed recommendations
on how to improve these dystrophin analyses, and FDA’s most recent advice was consistent with
advice provided after the April 2014 meeting.” (emphasis added). Plaintiffs insist that the use of
words like “consistent” and “reinforce” plausibly suggest that the FDA had previously told
Sarepta that its dystrophin data was insufficient to support an NDA, and that the FDA issued its
October 30, 2014 Statement to correct Sarepta’s suggestion that the NDA filing was being
delayed due to “updated” FDA guidance.
Even when viewing the facts in the light most favorable to Plaintiffs, the Court finds that
the FDA’s October 30, 2014 Statement cannot support the weight of that inference. First, the
FDA indicated that its Statement was intended to address “questions the agency has received
from DMD patients, their families, and others in the community who are concerned about the

26

timing of the filing of an NDA for eteplirsen.” This suggests that the FDA spoke primarily to
address questions from the DMD community, and not for the purpose of correcting any prior
statements made by Sarepta. Furthermore, the FDA’s Statement contains commentary that tends
to confirm, rather than correct, Sarepta’s representations to the market. The FDA stated, with no
apparent disagreement, that “[f]ollowing a meeting with FDA last April, Sarepta announced on
April 21, 2014 that ‘with additional data to support the efficacy and safety of eteplirsen . . . an
NDA should be fileable.” The FDA also noted that Sarepta had disclosed the fact that the
Agency “had communicated that there were areas of concern in the existing database, and that
FDA had provided Sarepta with ‘examples of additional data and analyses that, if positive, would
be important to enhance the acceptability of an NDA filing.’” (emphasis added). The FDA also
noted that Sarepta had announced “its plans to submit an NDA for eteplirsen by the end of
2014,” but the Agency did not seemingly take issue with either of these statements. These
considerations detract from the plausibility of Plaintiffs’ theory.
In addition, the FDA affirmatively stated that it was “important to note” that it “did not
find any evidence of fraud” at Sarepta’s clinical trial site, “as has been perceived by some.” The
FDA went on to note that it “is” (in the present tense) “concerned that the methods used to
measure dystrophin were not adequately robust to support an NDA submission.” To that point,
the FDA said it had recently provided Sarepta with recommendations on how to improve its
dystrophin analyses, and that this most recent advice was “consistent with” advice provided after
the April 2014 meeting. Critically, however, the FDA did not state that it had told Sarepta in
April 2014 that the Company’s existing dystrophin data was inadequate to support an NDA
submission. At best, the FDA’s Statement plausibly implies that in April 2014, it had raised
concerns about the dystrophin data and given Sarepta recommendations on how to strengthen the

27

data set, thereby “enhancing” the acceptability of an eventual NDA filing. Thus, the FDA’s
characterization of its own April 2014 guidance is not at all inconsistent with representations
made by Defendants during the Class Period. When read as a whole, the FDA’s October 30,
2014 Statement does not plausibly imply that it told Sarepta as early as April 2014 that the
existing dystrophin data would be insufficient to support an NDA. 9
Further, even assuming, arguendo, that the FDA had informed Sarepta in April 2014 that
its existing dystrophin data was not sufficient to support an NDA filing, the Defendants’
statements do not actually mislead investors on this point. Although Defendants do make
statements to the effect that Sarepta “could submit our NDA now,” they immediately clarify that
it would be unwise to do so, because the FDA had “highlighted questions and concerns” and
indicated that it was “not as comfortable with just the existing data set.” 4/21/2014 Conference
Call p. 12; see also 5/7/2014 Deutsche Bank Healthcare Conference Call p. 3 (noting that while
the FDA was “not saying [an NDA] wouldn’t be fileable on the current data set,” the FDA was
telling Sarepta “that we’ve raised enough concerns on the existing data set that you would bolster
your case for an NDA filing and potentially a favorable review if you allow us to do a more
detailed review of your dystrophin methodology . . . .”). When read in context, each of the
statements clearly communicates that filing an NDA without further data and analysis – although

9

The July 29, 2014 Woodcock Statement further detracts from the plausibility of Plaintiffs’
theory that the FDA had previously notified Sarepta about some fatal deficiency in its existing
dystrophin data. To the contrary, the Woodcock Statement notes that the FDA, in late July 2014,
was “actively engaged” with Sarepta and others on their development of DMD drugs, and that
the FDA was conducting “ongoing analyses” of eteplirsen which were “rigorous and extensive.”
[ECF No. 24-3]. Woodcock also noted, without any apparent disagreement, that Sarepta had
“publicly announced its intention to file a New Drug Application for eteplirsen by the end of
2014,” and assured petitioners that the FDA remained willing to explore accelerated approval
pathways to approving a DMD drug. Id.
28

perhaps possible – would be unadvisable. Thus, Plaintiffs have not plausibly alleged that
Defendants’ statements were materially misleading to investors.
Plaintiffs, perhaps realizing the weaknesses in their theory, filed an Opposition to
Defendants’ Motion to Dismiss that seemingly narrows the scope of their claims. Plaintiffs now
focus on the FDA’s request that Sarepta have independent pathologists at independent labs
reassess the dystrophin data, and the impact of that request on Defendants’ statements about the
“sufficiency” of the existing data. See [ECF No. 25, p. 27] (arguing that Defendants “falsely
portrayed the sufficiency of their dystrophin data and omitted that the FDA required independent
pathologists at independent labs to assess the dystrophin data as part of the NDA”).
Plaintiffs’ Complaint alleges that the FDA made this request for reassessment in July
2014. See, e.g., Compl. ¶¶ 13, 87, 129, 130(a), 149. If that allegation is accurate, Defendants’
statements on April 21, 2014, May 7, 2014, and May 13, 2014 could not have been false or
misleading in the manner alleged by Plaintiffs, because Defendants could not have
misrepresented or omitted to disclose what the FDA had not yet told them. 10

10

In an attempt to avoid this result, Plaintiffs’ counsel requested at oral argument that the Court
take judicial notice of a transcript from an August 12, 2015 motion hearing in the Corban case,
14-cv-10201-IT (D. Mass), in which Judge Talwani heard argument on a motion to amend the
complaint in that action. During that hearing, Plaintiffs’ counsel quoted from what was
represented to be pre-meeting comments from the FDA, in which the FDA purportedly asked
Sarepta to “confirm with an independent laboratory the immunohistochemical findings for
dystrophin and associated proteins in the previously collected tissue block,” and suggested that
this and other concerns should be “addressed prior to filing.” By pointing the Court to the
hearing transcript and this alleged document, Plaintiffs are suggesting there is reason to believe
that the FDA communicated its “request for reassessment” to Sarepta earlier than July 2014. The
Court, however, declines to consider the August 12, 2015 hearing transcript or the purported
document discussed at the hearing for purposes of this Motion to Dismiss. Although the Court
may take judicial notice of proceedings in other cases, it generally cannot do so for the truth of
any matters discussed during those proceedings. See Goguen ex rel. Estate of Goguen v. Textron,
Inc., 234 F.R.D. 13, 19 (D. Mass. 2006). Furthermore, even assuming that the FDA’s request for
reassessment pre-dated July 2014, this fact is not necessarily inconsistent with Defendants’

29

This leaves the August 7, 2014 earnings conference call with investors and analysts,
which post-dates Sarepta’s alleged receipt of the FDA’s July 2014 “request for reassessment.”
After examining a transcript of the conference call, the Court concludes that it does not contain
affirmative statements that could be deemed false or misleading in light of the facts alleged.
First, in contrast to earlier statements during the Class Period, Defendants did not make any
statements expressing confidence in the “sufficiency” of Sarepta’s existing dystrophin data.
Garabedian merely stated that the Company “continue[d] to have productive dialogue with the
FDA regarding our dystrophin methodology[,]” and reminded the audience that the FDA
indicated in its April 2014 guidance “that if, after further detailed review, they were to find the
currently available dystrophin biomarker data to be adequate, our existing dystrophin data set
would have the potential to support accelerated approval.” 8/7/2014 Conference Call, p. 6.
Garabedian also disclosed that the FDA had “recently completed a site visit with Nationwide
Children’s Hospital in Columbus, Ohio and met with the leadership and staff of the
histopathology lab that conducted our dystrophin analysis and quantification . . . .” Id. He noted
that Sarepta would “continue to work with the FDA to provide greater assurance of the quality
and reliability of our dystrophin data in anticipation of a potential NDA filing decision and
potential NDA review next year.” Id. Therefore, although Defendants did not disclose the FDA’s
request for reassessment, they also did not affirmatively state that the existing data was presently
sufficient to support an NDA. Instead, they truthfully represented that a review of that data was
ongoing.

expressions of confidence in their existing data set, nor would it necessarily be a material
development requiring disclosure, as explained more fully, infra.

30

Furthermore, the fact that Sarepta received a “request for reassessment” of its existing
dystrophin data by independent pathologists does not equate to a statement from the FDA that
the existing data was categorically inadequate, or even a suggestion that the data was
“insufficient” to support an NDA filing. At best, it suggests that the FDA had concerns about the
methodology, and that it wanted Sarepta to have independent experts reassess the data and either
affirm or reject the reliability of Sarepta’s results before the data was submitted in an NDA.
Therefore, Defendants’ expressions of confidence in the “sufficiency” of the data are not at odds
with the FDA’s request for reassessment, where the sufficiency of the data set was an open
question at that point in time. 11 Thus, to the extent Plaintiffs’ claims are premised on affirmative
statements regarding the sufficiency of Sarepta’s existing data set, the Court finds that Plaintiffs
fail to allege facts plausibly suggesting that these statements were false or misleading.
Alternatively, Plaintiffs allege that Defendants made actionable omissions when they
failed to disclose during the Class Period that Sarepta had received a request for reassessment of
its dystrophin data in July 2014. It is well-established that “Section 10(b) does not create an
affirmative duty to disclose.” In re Genzyme Corp. Sec. Litig., 754 F.3d 31, 41 (1st Cir. 2014).
“A duty to disclose information earlier omitted arises only when affirmative statements were
made and the speaker ‘fail[ed] to reveal those facts that are needed so that what was revealed
would not be so incomplete as to mislead.’” Id. (quoting In re Boston Sci. Corp. Sec. Litig., 686
F.3d 21, 27 (1st Cir. 2012)) (alteration in original).

11

It appears that Sarepta eventually filed its NDA for eteplirsen with the FDA in May 2015, see
Declaration of Justin G. Florence, Exhibit 1 [ECF No. 30-1] (May 19, 2015 Sarepta Press
Release), and the FDA accepted the NDA for filing later that year. See August 25, 2015 Sarepta
Press Release, available at http://investorrelations.sarepta.com/phoenix.zhtml?c=64231&p=irolnewsArticle&ID=2081965, last visited March 31, 2016.
31

Here, the only instance in which Sarepta “spoke” during the Class Period after July 2014
was the August 7, 2014 earnings conference call with investors. Plaintiffs do not explain in their
Complaint or their Opposition how disclosing the FDA’s request for reassessment was necessary
to make the August 7th conference call not misleading. Although Plaintiffs argue that “failure to
disclose FDA’s serious criticism” of clinical trial data can be a “material omission,” they rely on
cases with very different facts. For example, in In re Transkaryotic Therapies, Inc. Securities
Litigation, 319 F. Supp. 2d 152 (D. Mass. 2004), the defendant pharmaceutical company failed
to disclose FDA criticism of the company’s clinical trials, which the FDA had issued in a
“Complete Review Letter” in response to the company’s new drug application. See id. at 156.
The Complete Review Letter concluded, in no uncertain terms, that the studies “failed to
demonstrate efficacy,” that one of the studies suffered from “serious methodological
deficiencies,” and that “additional analyses or otherwise revised analyses of the clinical data you
have submitted will be unable to address this deficiency.” Id. (emphasis added). Thus, the FDA
recommended that the company “conduct additional clinical studies and submit the results.” Id.
Not only did the defendants fail to disclose this decisive FDA guidance; they also issued press
releases stating that the FDA’s Complete Review Letter merely “requested additional data and
asked for further explanation in several areas.” Id. Not surprisingly, the court in Transkaryotic
found that plaintiffs adequately alleged material omissions. Id. at 159-60.
Here, in contrast, Defendants allegedly failed to disclose the FDA’s request for an
“independent reassessment” of Sarepta’s existing dystrophin data. There was no final decision to
communicate—merely interim feedback in the context of an ongoing dialogue on Sarepta’s
planned NDA submission, which had yet to be filed. The interim and indefinite nature of the
FDA’s reassessment request undermines the notion that Defendants had a duty to disclose it. See,

32

e.g., Vallabhaneni v. Endocyte, Inc., No. 14-cv-01048, 2016 WL 51260, at *12 -*14 (S.D. Ind.
Jan. 4, 2016) (holding that company did not have duty to disclose interim feedback from FDA
criticizing its clinical trial methodology, where criticism was not so severe as to suggest that the
drug was ineffective, or that further studies would be futile); In re Sanofi Sec. Litig., 87 F. Supp.
3d 510, 541-42 (S.D.N.Y. 2015) (allowing defendants’ motion to dismiss, and noting that
multiple courts have “rejected claims of material omissions where pharmaceutical companies did
not reveal procedural or methodological commentary, or other interim status reports, received
from the FDA as to drugs under review”), aff’d sub nom. Tongue v. Sanofi, No. 15-588-CV,
2016 WL 851797 (2d Cir. Mar. 4, 2016); Noble Asset Mgmt. v. Allos Therapeutics, Inc., No.
CIVA-04CV-1030, 2005 WL 4161977, *7 (D. Colo. Oct. 20, 2005). Although failure to disclose
nearly-fatal criticism from the FDA might constitute an actionable omission in an appropriate
case, see Transkaryotic, 319 F. Supp. 2d at 159, the FDA’s July 2014 reassessment request does
rise to that level.
Furthermore, the Court finds it significant that throughout the Class Period, Sarepta
expressly and repeatedly informed the investing public about the FDA’s concerns with the
methodology Sarepta used to assess the dystrophin data. See, e.g., 4/21/2014 8-K, p. 8 (noting
that the FDA “expressed concerns about methodological problems in the assessments of
dystrophin and, ‘remain skeptical about the persuasiveness of the (dystrophin) data,’” such that
“the Agency is ‘uncertain whether the existing dystrophin biomarker data will be persuasive
enough to serve as a surrogate endpoint’”); 4/21/2014 Conference Call (“We could submit our
NDA now on the existing data set, but the FDA has highlighted questions and concerns, and they
are not as comfortable with just the existing data set.”); 5/7/2014 Deutsche Bank Conference
Call p. 3 (paraphrasing FDA as saying that “we’re telling you that we’ve raised enough concerns

33

on the existing data set that you would bolster your case for an NDA filing and potentially a
favorable review if you allow us to do a more detailed review of your dystrophin methodology . .
. .”). These disclosures undercut Plaintiffs’ suggestion that the FDA’s formal request for
reassessment in July 2014 was a watershed event that should have been disclosed, or that
Defendants’ failure to do so was materially misleading.
For these reasons, the Court finds that Plaintiffs have not alleged sufficient facts to
plausibly suggest that Defendants made affirmatively misleading statements, or that they omitted
to disclose information needed to make their statements not misleading.
2. Scienter
For similar reasons, the Court also finds that Plaintiffs do not allege facts giving rise to a
“strong inference” of scienter – i.e., one that is “at least as compelling as any opposing inference
one could draw from the facts alleged.” Tellabs, Inc., 551 U.S. at 324. To survive dismissal,
Plaintiffs would have needed to allege facts strongly suggesting that Defendants were knowingly
dishonest or reckless in failing to disclose the FDA’s reassessment request. See Boston Sci.
Corp., 686 F.3d at 31. In Boston Scientific, the First Circuit observed that:
[i]n cases where we have found the pleading standard satisfied, the
complaint often contains clear allegations of admissions, internal
records or witnessed discussions suggesting that at the time they
made the statements claimed to be misleading, the defendant
officers were aware that they were withholding vital information or
at least were warned by others that this was so.
Id. Here, Plaintiffs allege no such facts in their Amended Complaint.
Further, the few facts Plaintiffs proffer in support of their scienter theory are legally
inadequate. First, the Defendants’ presence at FDA meetings, and their resulting first-hand
knowledge of the FDA’s guidance, does not support a strong inference of scienter. As previously
noted, Plaintiffs have not offered any compelling explanation of why Defendants’ statements or

34

omissions were fundamentally at odds with any guidance the FDA purportedly provided.
Additionally, any inference that the Defendants knowingly or recklessly failed to disclose the
FDA’s request for reassessment is undermined by the Company’s repeated disclosures about the
FDA’s concerns with the existing dataset. See In re Genzyme Corp. Sec. Litig., No. CIV. 0911299-GAO, 2012 WL 1076124, at *12 (D. Mass. Mar. 30, 2012) (finding that defendants’
“repeated and timely disclosures of material information seriously undermine an inference of
intent to deceive”), aff’d, 754 F.3d 31 (1st Cir. 2014); In re Polaroid Corp. Sec. Litig., 134 F.
Supp. 2d 176, 186 (D. Mass. 2001) (“[A]ny indication of scienter that one might draw from
Polaroid’s arguably overly optimistic statements about future business is offset by the
Company’s cautionary admissions in its . . . annual reports.”).
Plaintiffs also contend that Defendants’ failure to release the full text of the FDA’s April
2014 “guidance letter” supports a strong inference of scienter. The Court disagrees. Generally,
companies are under no obligation to disclose their written communications with the FDA to the
general public, and the Court declines to infer scienter from the fact that Defendants have refused
to produce the guidance letter to Plaintiffs in this securities fraud action.
Similarly, the Court rejects Plaintiffs’ theory that scienter can be inferred from the timing
of Sarepta’s public offering, which occurred the week after the Company’s April 21, 2014 press
release. Standing alone, “the existence of a public offering during the period of alleged
misrepresentations cannot itself lead to an inference of scienter.” In re Boston Sci. Corp. Sec.
Litig., No. CIV.A. 10-10593-DPW, 2011 WL 4381889, at *15 (D. Mass. Sept. 19, 2011) aff’d,
686 F.3d 21 (1st Cir. 2012); see also Coyne v. Metabolix, Inc., 943 F. Supp. 2d 259, 271-72 (D.
Mass. 2013) (theory that defendants lied in order to inflate stock prices was a “generalized

35

motive [that] could apply to any corporate executive at any company anywhere in the United
States,” and therefore did not give rise to a strong inference of scienter).
Finally, at oral argument, counsel for Plaintiffs argued that scienter can be inferred from
the fact that Sarepta was engaged in a “desperate” race with its competitor, Prosena, to secure
first-mover advantage in the DMD drug market. See Compl. ¶¶ 37-38. Even assuming this
allegation to be true, it does not strongly imply that Defendants intentionally or recklessly misled
potential investors. Ultimately, it would be the FDA – not the investing public – that would
decide whether to approve a drug for marketing and sale. Thus, Plaintiffs have not plausibly
alleged a motive to mislead. 12
After considering all the facts alleged as an integrated whole, N.J. Carpenters Pension &
Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35, 45 (1st Cir. 2008), the Court finds that
Plaintiffs have not met the PSLRA’s pleading standard with respect to scienter. Although
Plaintiffs allege facts that could theoretically support a finding of scienter, under these
circumstances, “the inference of the requisite intent to defraud is certainly not cogent or
compelling.” Genzyme Corp., 754 F.3d at 42.
V.

CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion to Strike [ECF No. 26] is ALLOWED IN

PART and DENIED IN PART. Defendants’ Motion to Dismiss the Amended Complaint [ECF
No. 21] is ALLOWED, and all claims against the Defendants are hereby DISMISSED. 13
12

Although Plaintiffs offered additional arguments for scienter in their Opposition brief
(including the departure of some Sarepta executives, including Garabedian), such facts were not
alleged in the Complaint, and the Court declines to consider them for purposes of this Motion to
Dismiss.
13

Because Plaintiffs fail to plead a viable claim for securities fraud under Section 10 and Rule
10b-5, all derivative claims against the individual Defendants necessarily fail as well. See Hill v.
Gozani, 638 F.3d 40, 70 (1st Cir. 2011).
36

SO ORDERED.
Dated: April 5, 2016

/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE

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