Pfizer World Headquarters.
Pfizer World Headquarters. (Photo: Norbert Nagel via Wikimedia Commons.)

The Third Circuit has upheld dismissal of a New Jersey-based securities class action against a Pfizer subsidiary that allegedly kept secret the failings of an experimental Alzheimer’s disease treatment.

The plaintiffs fell short of making out claims that Wyeth Inc., in a joint venture with drugmaker Elan Corp., misled investors about the successfulness of the testing of the drug, bapineuzumab, by announcing that the process was advancing to the next stage.

“Interpretations of clinical trial data are considered opinions,” which “are only actionable under the securities laws if they are not honestly believed and lack a reasonable basis,” Circuit Judge Anthony Scirica held June 6 in City of Edinburgh Council v. Pfizer.

Two pension funds brought the suit under the Private Securities Litigation Reform Act of 1995 on behalf of investors who bought Wyeth stock from May 2007 to July 2008.

Wyeth, which was acquired by Pfizer in 2009, and Elan, an Irish pharmaceutical company, together developed bapineuzumab and began clinical trials in 2006. They quickly progressed to phase two of a three-phase process regulated by the federal Food and Drug Administration.

The plaintiffs relied heavily on a May 2007 press release announcing its intention to begin the next phase of testing later that year, which put stock prices on the rise. The release stated that this decision was based partly on interim phase-two test results but warned, “No conclusion … can be drawn until the study is completed and the final data are analyzed and released in 2008.”

They claimed that, despite the move to phase three, the drug was showing little efficacy and causing severe side effects, in some cases death, according to the opinion.

The plaintiffs pointed to a previous statement from 2006 by Wyeth head of research Robert Ruffolo Jr. that the drugmakers “could advance directly into Phase III in the first half of 2007, but the results would have to be spectacular.” The May 2007 announcement that testing would proceed to phase three led the plaintiffs to believe that it was going well, they claimed.

The suit also alleged that Ruffolo and fellow Wyeth executive Kenneth Martin profited from the cover-up by exercising and selling stock options the day after the May 2007 announcement.

In June and July 2008, Wyeth and Elan announced that, despite benefits to some patients, the drug had failed to meet objectives, leading to the suit.

In April 2013, U.S. District Judge Susan Wigenton in Newark dismissed it, finding the plaintiffs failed to allege any affirmatively false or misleading statements.

On June 6, Scirica, along with Circuit Judges D. Brooks Smith and Patty Shwartz, affirmed, holding that the plaintiffs’ reliance on the May 2007 release “fails because it is based on a selective reading of that document.”

The release stated that the Phase Two interim results were only part of the reason for proceeding to the next phase and “made no statement about the strength of the interim results,” Scirica said.

He called Ruffolo’s statement, that test results would have to be “spectacular” to move into Phase Three, mere “puffery.”

That previous statement, coupled with the May 2007 announcement, was not a basis to draw conclusions about the test results, Scirica said. “Had the interim results been ‘spectacular,’ it is reasonable to assume the companies would have trumpeted that fact in the May 2007 release—or at least given some indication the data were positive.”

The drugmakers never even announced what minimum results bapineuzumab would need to achieve prior to Phase Three, and the plaintiffs themselves asserted that there was a difference of opinion within Wyeth and Elan, the court said.

“A company’s failure to accurately disclose clinical trial data may be actionable under the securities laws, but the cases the [plaintiffs] cite are distinguishable because they involve plausible allegations of affirmative false statements about a drug’s efficacy and safety,” Scirica wrote.

He added that moving to Phase Three “cost millions of dollars and required FDA approval, rendering it improbable that defendants would have continued if they did not believe their interpretation of the interim results or if they thought the drug a complete failure.”

Other statements by company officials, including that bapineuzumab had the potential to be a breakthrough drug, also made no claims about the Phase Two results, Scirica said.

The court also rejected claims that Wyeth and Elan had a duty to update investors on the status of the Phase Two testing, and affirmed dismissal of insider-trading claims.

It’s at least the fourth investor class suit against the drugmakers over bapineuzumab to be thrown out. The panel noted that three other putative class actions were dismissed: by the U.S. Court of Appeals for the Second Circuit, the Southern District of New York and the Northern District of California.

Daniel Berger of Grant & Eisenhofer in New York, who argued for the plaintiffs, said a petition for en banc review is under consideration but declined further comment.

John Villa of Williams & Connolly in Washington, D.C., who argued for the defendants, deferred comment to Pfizer spokesman Steve Danehy.

Danehy said the suit “had no merit” and the “company’s disclosures relative to the development of a medicine to treat Alzheimer’s were accurate and appropriate at all times.”

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