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In re Pfizer Inc. Securities Litigation

July 1, 2008

IN RE PFIZER INC. SECURITIES LITIGATION


The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge

OPINIONANDORDER*fn1

Lead Plaintiff Teachers' Retirement System of Louisiana ("TRSL") brings this action on behalf of a putative class of investors ("Plaintiffs") who purchased or acquired Pfizer Inc. ("Pfizer") stock between October 31, 2000 and October 19, 2005 (the "Class Period") against Pfizer and corporate officers Henry McKinnell, John LaMattina, Karen Katen, Joseph Feczko, and Gail Cawkwell (together, the "Individual Defendants") (together with Pfizer, "Defendants"). Plaintiffs allege that Defendants violated federal and state laws by concealing the results of three medical studies concerning two Pfizer drugs, Celebrex and Bextra, and by making misstatements and omissions in their public filings and statements.

Defendants have moved to dismiss the complaint. Plaintiffs have moved to strike certain exhibits attached to and portions of Defendants' memorandum of law in support of their motion to dismiss. The Court has reviewed thoroughly all of the parties' submissions and arguments in connection with these motions. For the reasons that follow, Defendants' motion to dismiss is granted in part and denied in part. In light of the resolution of the motion to dismiss, Plaintiffs' motion to strike is moot.

BACKGROUND

For the purposes of this motion, the Court takes the following facts drawn from the Consolidated Class Action Complaint ("CCAC") as true.

I. Defendants

Pfizer is a research-based, global pharmaceutical company that develops, manufactures, and markets prescription medicines for humans and animals, as well as consumer healthcare products. (CCAC ¶ 17.) As of November 4, 2005, Pfizer had approximately 7.37 billion shares outstanding trading on the New York Stock Exchange. (Id.) Pfizer is the successor-in-interest of Pharmacia, having acquired Pharmacia-and Pharmacia's interest in Celebrex and Bextra-on or about April 16, 2003, in a transaction valued at $60 billion. (Id.)

The Individual Defendants were executive officers of Pfizer during the relevant period. Since 2001, Henry McKinnell has been Pfizer's Chief Executive Officer and Chairman of the Board of Directors. (Id. ¶ 18.) John LaMattina has been Senior Vice President and President of Pfizer Global Research and Development since 2003. (Id. ¶ 23.) Karen Katen was Executive Vice President and President of Pfizer Pharmaceuticals from April 2001 to March 2005. Thereafter, she became Vice Chairman and President of Pfizer Human Health. (Id. ¶ 27.) During the Class Period, Joseph M. Feczko was the President of Worldwide Development, and Gail Cawkwell was Pfizer's medical team leader for Celebrex. (Id. ¶¶ 31, 33.)

During the Class Period, McKinnell, LaMattina, and Katen all made strategic decisions for the company. (Id. ¶¶ 19, 24, 28.) Furthermore, all of the Individual Defendants made numerous public statements concerning Celebrex and Bextra during the Class Period. (Id. ¶¶ 21, 25, 29, 32, 34.) By virtue of their high-level positions and direct involvement in the day-to-day activities of the company, the Individual Defendants were privy to confidential non-public information concerning the operations of Pfizer. (Id. ¶ 36.) In addition, the Individual Defendants were involved in drafting, reviewing, approving, ratifying, and/or disseminating the financial statements disclosed by Pfizer. (Id.)

II. Development of Celebrex and Bextra

Celebrex and Bextra, like the well-known drug Vioxx, are non-steroidal anti-inflammatory drugs ("NSAIDs") belonging to a class of drugs known as Cyclooxygenase 2 ("COX-2") inhibitors. (Id. ¶ 48.) Celebrex (celecoxib) and Bextra (valdecoxib) were developed to treat chronic pain. (Id. ¶¶ 1, 43.) Traditional NSAIDs, such as aspirin, ibuprofen, and naproxen, inhibit both the COX-1 and COX-2 enzymes, and tend to cause harmful gastrointestinal side effects. (Id. ¶¶ 42-43.) The COX-1 enzyme promotes the production of the stomach's natural protective mucus lining. (Id. ¶ 43.) The COX-2 enzyme is responsible for promoting inflammation. (Id.) The possibility of suppressing only the COX-2 enzyme-responsible for inflammation and pain-without inhibiting the COX-1 enzyme meant that COX-2 inhibitors had the potential to harness the beneficial attributes of NSAIDs without the harmful gastrointestinal side effects. (Id. ¶ 44.)

Celebrex was the first COX-2 inhibitor to obtain FDA approval, which it received in December 1998. (Id. ¶ 48.) The FDA first approved Celebrex for use by prescription for treating pain and inflammation caused by osteoarthritis and adult rheumatoid arthritis. (Id. ¶ 50.) Later, Celebrex was approved for the treatment of acute adult pain or pain after surgery, as well as for the treatment of primary dysmenorrhea-painful menstrual cramps. (Id.) The FDA approved Bextra in November 2001 for use by prescription for treating osteoarthritis, rheumatoid arthritis, and primary dysmenorrhea, but not for acute pain. (Id. ¶ 61.)

Plaintiffs allege that Pfizer's financial success and future prospects depended on Celebrex and Bextra becoming "blockbuster" drugs because of looming patent expiration dates for several of its best-selling drugs. (Id. ¶ 66.) Pfizer's patents on Ambien (2006), Zithromax (2005), and Zoloft (2006) were set to expire within five years after Celebrex and Bextra's expected market arrival. (Id.) Indeed, initially Celebrex and Bextra were extremely successful. (Id. ¶ 69.) By 2004, for example, Celebrex and Bextra accounted for almost nine percent of Pfizer's revenue, totaling over $4.5 billion. (Id. ¶ 71.)

Defendants made numerous representations about the safety of Celebrex and Bextra, including that they were safer than Merck & Co. Inc.'s ("Merck") competing drug, Vioxx. (Id. ¶ 72.) For example, in an October 18, 2002 press release, Pfizer touted Bextra as an effective and safe form of pain reliever: "Analyses of pooled study results for the COX-2 specific inhibitor BEXTRA . . . underscored its improved upper gastrointestinal (GI) safety as well as its cardiovascular safety profile." (Id. ¶¶ 88, 187.)

On November 13, 2002, Pfizer stated in its 10-Q that "the FDA approved revised labeling for Celebrex. The new prescribing information includes additional gastrointestinal safety data and data indicating that there was no increased risk for serious cardiovascular adverse events observed, including heart attack, stroke and unstable angina." (Id. ¶ 188.) On July 25, 2003, on a quarterly conference call, Katten stated that "[a]n independent analysis that included our entire Celebrex arthritis clinical trial database, found no evidence in increased cardiovascular risk for Celebrex, relative to both conventional, non-steroidal anti-inflammatory drugs and placebo." (Id. ¶ 194.) The CCAC alleges that Pfizer and its representatives made numerous similar statements throughout the class period. (Id. ¶¶ 170-231.)

III. The Studies

Plaintiffs allege that senior officials at Pfizer, including the Individual Defendants, knew from a very early date that Celebrex and Bextra had adverse cardiovascular effects. (Id. ¶¶ 74-82, 248-67.) Specifically, Plaintiffs contend that Defendants were aware of three studies which revealed these adverse effects.

The first, the Alzheimer's Study, completed in 1999, revealed that patients taking Celebrex were more likely to experience negative cardiovascular effects such as stroke or cardiac failure than patients taking a placebo. (Id. ¶ 93.) The Alzheimer's Study included 425 patients and, as the name suggests, focused on the effect of Celebrex on patients with Alzheimer's Disease. (Id. ¶ 94.) In the study, 285 patients were given Celebrex and 140 were given a placebo. Twenty-two of the patients taking Celebrex and three of the patients taking the placebo suffered adverse cardiovascular effects. (Id.) Adverse cardiovascular events were observed in patients taking Celebrex at a rate 3.6 times greater than observed in patients taking the placebo. (Id. ¶ 93.) The study's authors concluded that "[a] statistically significant difference favoring placebo in adverse events was observed." (Id. ¶ 94.) The study was never published (id. ¶ 95), and the results only became public in early January 2005, when Pfizer surreptitiously posted the results on the pharmaceutical industry's main trade group's website. (Id. ¶ 97.)

In the second study, the Celecoxib Long-Term Arthritis Safety Study (the "CLASS Study"), Pfizer sought to demonstrate Celebrex's superior gastrointestinal safety profile. (Id. ¶ 98.) When the study was completed in March 2000, Pfizer sent the Food and Drug Administration ("FDA") the portion of the study showing the gastrointestinal results. (Id. ¶ 99.) Pfizer did not send the FDA another portion of the study, which showed increased risk of cardiovascular problems. (Id.) The results of the CLASS Study were published on September 13, 2000, in an article in the Journal of the American Medical Association ("JAMA"). (Id. ¶ 101.) However, the published study and the accompanying JAMA article omitted key information about the study, namely that it covered a twelve-month period, not a six-month period, and revealed that Celebrex posed serious cardiovascular risks. (Id. ¶ 102.) Indeed, the full twelve-month data set revealed that the rate of adverse cardiovascular events in the population taking Celebrex was 1.4%, as opposed to rate of 1.0% for the other NSAID groups. (Id. ¶ 93.) Furthermore, the results showed an elevated rate of heart attacks. In the Celebrex sample pool, the heart attack rate was 1.6% whereas in the pool taking low-dose aspirin, the rate was 1.2%. (Id. ¶ 105.)

In the third study, the Coronary Artery Bypass Graft Trial of Bextra ("CABG Trial"), Pfizer studied 311 patients on Bextra and 151 on a placebo. (Id. ¶ 108.) In the course of Bextra's FDA approval, an FDA medical officer commented that "[t]he excess of serious cardiovascular thromboembolic [blood clots] in the valdecoxib arm of the CABG trial . . . is of note as the entire study population received prophylactic low dose aspirin as part of the standard of care in this setting to minimize just such events." (Id. ¶ 111.) Pfizer redacted this statement from the publicly-available Bextra Approval package. (Id. ¶ 112.) In December 2004, Pfizer quietly released all of the results of the CABG Trial. (Id. ¶ 118.) These previously concealed results warned of negative cardiovascular side effects associated with Bextra. (Id.)

Plaintiffs allege that Defendants deliberately concealed or misrepresented the results of these studies. According to one member of a safety monitoring board for Celebrex, the Alzheimer's Study "should have been fully published in 2000, and perhaps if it had been some attention might have been drawn to potential safety issues." (Id. ¶ 87.) On November 13, 2001, Defendants issued a press release stating that the CLASS Study revealed that "Celebrex (celecoxib capsules) is not associated with an increased risk of cardiovascular (CV) adverse events compared to the NSAIDs studied." (Id. ¶ 177.) On September 30, 2004, Pfizer asserted in a press release that "Bextra's cardiovascular safety profile is . . . well established in long-term studies." (Id. ¶ 206.) In addition, Plaintiffs allege that Defendants made numerous misstatements and omissions in Pfizer's public filings and statements, thereby misleading investors about the commercial potential of Celebrex and Bextra. See, e.g., id. ¶ 181 (stating in a press release announcing Pfizer's fourth quarter and full-year financial results for 2001 that "Celebrex provides strong efficacy, outstanding tolerability, and a superior safety profile to Vioxx. These advantages have translated into a higher refill rate, higher patient satisfaction level, and higher persistence of use for Celebrex"); id. ¶ 207 ("Data demonstrate[s] that Celebrex does not increase the risk of heart attack or stroke in patients with arthritis and pain, even at higher-than-recommended doses."); see also id. ¶¶ 170-231.

IV. Revelations About Celebrex and Bextra

On September 30, 2004, Merck withdrew Vioxx from the market. (Id. ¶ 120.) That day, Pfizer issued a statement that "[t]he evidence distinguishing the cardiovascular safety of Celebrex has accumulated over the years in multiple completed studies, none of which has shown any increased cardiovascular risk for Celebrex." (Id. ¶ 121.) Defendant Cawkwell further stated that "[t]he cardiovascular data for Celebrex and Bextra in the long-term arthritis studies has been good." (Id.)

Nevertheless, in late 2004 and early 2005, information about Celebrex and Bextra's negative cardiovascular effects began to emerge. (Id. ¶¶ 127-136.) On April 7, 2005, the FDA insisted Pfizer insert a "black box" warning in Celebrex's label. (Id. ¶ 141.) A black box warning is the most negative warning the FDA uses, and is the last step before a drug is pulled from the market. (Id. ¶ 140.) On the same day, April 7, 2005, Pfizer announced that the FDA had directed it to remove Bextra from the market. (Id. ¶ 146.) Currently, Celebrex is sold with a black box warning label. (Id. ¶ 7.) Bextra remains off the market. (Id.) During the Class Period, Pfizer stock rose to a high of $47.44 per share before falling to $21.09. (Id. ¶ 150.)

V. Claims Asserted

Plaintiffs assert the following causes of action: Defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder by making materially false statements or omissions about the commercial viability of Celebrex and Bextra (Count I); Defendants violated Section 10(b) and Rule 10b-5(a) and (c) specifically by creating a scheme to defraud Plaintiffs (Count II); and Individual Defendants McKinnell, LaMattina, and Katen violated Sections 20(a), 18, and 20A of the Exchange Act (Counts III, VI, and VII, respectively). Finally, Lead ...


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