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In Re Pfizer Inc. Securities Litigation

March 28, 2012

IN RE PFIZER INC. SECURITIES LITIGATION


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

This document relates to: All Actions

OPINION

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 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" or "Pfizer"). Plaintiffs allege that Defendants fraudulently misrepresented the cardiovascular risks associated with two Pfizer drugs, Celebrex and Bextra. Since the filing of the Consolidated Class Action Complaint on February 16, 2006, this case has survived a motion to dismiss, two motions for reconsideration, and a five-day Daubert proceeding. Plaintiffs filed an Amended Consolidated Class Action Complaint ("CCAC") on March 27, 2012. The Court granted Plaintiffs' motion for class certification on March 29, 2012, and the class was certified on July 5, 2012.

Now before the Court is Defendants' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The Court has considered thoroughly all of the parties' arguments and, for the following reasons, the motion is granted in part and denied in part.

BACKGROUND

The following background facts are undisputed except as indicated.

Lead Plaintiff, the Teachers' Retirement System of Louisiana ("Lead Plaintiff" or "TRSL") and Named Plaintiffs Christine Fleckles, Julie Perusse and Alden Chace, represent a certified class consisting of all persons and entities who purchased or otherwise acquired securities issued by Pfizer Inc. ("Pfizer"), between and including October 31, 2000, through October 19, 2005 (the "Class Period"). Lead Plaintiff and the Named Plaintiffs also represent a sub-class (the "20A Subclass") consisting of all persons or entities who purchased contemporaneously with sales of Pfizer common stock by certain Pfizer corporate officers on specified dates.

Defendant Pfizer is a research-based, global pharmaceutical company that develops, manufactures and markets prescription medicines, as well as consumer healthcare products. Pfizer acquired Pharmacia Corporation ("Pharmacia"), including all of Pharmacia's interest in the drugs at issue -- Celebrex and Bextra -- on or about April 16, 2003. G.D. Searle & Co. ("Searle"), the company that began the research and development of Celebrex, had been acquired by Pharmacia in 2000. Prior to its acquisition of Pharmacia, Pfizer had a co-promotion agreement regarding Celebrex, first with Searle and then with Pharmacia.*fn1 (Defendants' Exs. 33 and 34.)

The Individual Defendants, Henry McKinnell, Karen Katen, John LaMattina, Joseph Feczko, and Gail Cawkwell, were all senior Pfizer officers during the Class Period. Henry McKinnell was Pfizer's Chief Executive Officer from January 2001 through the end of the Class Period, and the Chairman of Pfizer's Board of Directors from May 2001 through the end of the Class Period. (Defendants' 56.1 Statement ¶ 1.*fn2 ) Karen Katen, a Pfizer employee since 1974, was president of Pfizer's pharmaceuticals operation during the bulk of the Class Period and was Vice Chairman and President of Pfizer's human health division as of March 2005. (Id. ¶ 2.) Dr. John LaMattina, a Pfizer employee since 1977, was Pfizer's head of research and development from October 2003 through the end of the Class Period. (Id. ¶ 3.) Dr. Joseph Feczko was a senior vice president for medical and regulatory operations at Pfizer who served as president of worldwide development within Pfizer's global pharmaceuticals unit from June 2002 through the end of the Class Period. He served as Pfizer's Chief Medical Officer from February 24, 2005 through the end of the Class Period. (Id. ¶ 4.) Dr. Gail Cawkwell joined Pfizer in December 2000. She served as a medical director and was responsible for Celebrex and Bextra during parts of the Class Period. (Id. ¶ 5.)

This action involves securities law claims based on Defendants' allegedly fraudulent misrepresentations and omissions regarding the safety of two of Pfizer's pain-relieving drugs, Celebrex (celexocib) and Bextra (valdecoxib). Celebrex and Bextra are part of a class of drugs known as Cyclooxygenase 2 ("COX-2") inhibitors, that in turn is part of a broader class of non-steroidal anti-inflammatory drugs ("NSAIDs"). COX-2 inhibitors are primarily used to treat pain resulting from arthritis and were designed as an alternative to older, traditional NSAIDs such as aspirin, ibuprofen and naproxen.*fn3 Merck's drug Vioxx was the biggest competitor of Celebrex and Bextra in the COX-2 inhibitor market.

Between 1998 and 2004, Defendants conducted various studies of the efficacy and safety of Celebrex and Bextra. Plaintiffs have proffered evidence that several of these studies indicated that Celebrex and Bextra were associated with increased cardiovascular risks, and that the results of the studies were internally recognized by Pfizer senior management, including the Individual Defendants.*fn4 Plaintiffs allege that, prior to the fall of 2004, Defendants concealed material results of these tests and made false statements regarding the cardiovascular risks associated with Celebrex and Bextra. Defendants contend that certain risks were truthfully disclosed and that others were not identified until 2004.

On September 30, 2004, Merck announced that it was withdrawing Vioxx from the market, due to cardiovascular risks associated with the drug. (Defendants' 56.1 Statement ¶ 42; Defendants' Ex. 80.) Upon receipt of this news, Defendant McKinnell, Pfizer's CEO at the time, issued the following directive to Pfizer's senior officers:

We need to move immediately to avoid collateral damage and to exploit what could be a major opportunity. I see the priorities as the following: 1. Avoid this becoming a class effect. We need a press release out the door before 9 am making it clear that our clinical studies in tens of thousands of patients show no signal of cardiovascular complications. To the contrary we have seen strong signals of beneficial effects in cancer, etc. How to handle Bextra is an interesting problem. I suggest we focus on Celebrex . . . (Plaintiffs' Ex. 387.) Following this email, Pfizer issued a press release stating:

The evidence distinguishing the cardiovascular safety of Celebrex has accumulated over years in multiple completed studies, none of which has shown any increased cardiovascular risk for Celebrex.

(Plaintiffs' Ex. 385.) With regard to Bextra, the release stated only that "Bextra's cardiovascular safety profile is also well established in long-term studies." (Id.)

On October 15, 2004, Pfizer sent a letter to healthcare professionals, disclosing the cardiovascular risks associated with Bextra that had become apparent in the CABG-I and CABG-II studies. (Plaintiffs' Ex. 339.) The letter stated that, in the two CABG studies, "a higher rate of serious cardiovascular thromboembolic events (e.g., myocardial infarction, cerebrovascular accident) was observed in the parecoxib [intravenous form of Bextra] /valdecoxib and valdecoxib alone treatment arms compared to the group of patients receiving placebo." (Id.) On November 24, 2004, the FDA approved a revised product label for Bextra that disclosed the statistically significant cardiovascular events seen in Bextra-treated patients in the CABG-I and CABG-II studies. (Plaintiffs' Ex. 414 at Phelan-K 10000317140 and 7146.)

On December 16, 2004, the National Cancer Institute announced that it was prematurely ending a long-term, placebo-controlled trial of Celebrex in cancer patients (the "APC Study") because of an increased rate of heart attacks and strokes in patients taking Celebrex. (Defendants' Ex. 84.) Pfizer disclosed the results of the APC Study to the market on the morning of December 17, 2004. (Defendants' Ex. 85.) On April 7, 2005, the FDA required Pfizer to insert a black box warning in Celebrex's label, stating that Celebrex "may cause an increased risk of serious cardiovascular thrombotic events, myocardial infarction, and stroke, which can be fatal." (Plaintiffs' Ex. 446.) On this same day, the FDA issued an alert stating that it had requested that Pfizer voluntarily withdraw Bextra from the United States market, given Bextra's "potential increased risk fo[r] serious cardiovascular (CV) adverse events . . . , an increased risk of serious skin reactions . . . , and the fact that Bextra [had] not been shown to offer any unique advantages over the other available NSAIDs." (Defendants' Ex. 449.)

DISCUSSION

Summary judgment is to be granted in favor of a moving party if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986) (the moving party bears the burden of establishing that there is no genuine issue of material fact). A fact is considered material if "it might affect the outcome of the suit under the governing law," and an issue of fact is a genuine one where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Rojas v. Roman Catholic Diocese of Rochester, 660 F.3d 98, 104 (2d Cir. 2011) (quoting Anderson, 477 U.S. at 248). The Second Circuit has explained, however, that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts" and "may not rely on conclusory allegations or unsubstantiated speculation." DeFabio v. East Hampton Union Free School Dist., 623 F.3d 71, 81 (2d Cir. 2010). Rather, the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. Duch v. Jakubek, 588 F.3d 757, 764 n.2 (2d Cir. 2009); see also Fed. R. Civ. P. 56(e). The trial court's task at the summary judgment motion stage of the litigation is limited to discerning whether there are any genuine issues of material fact to be tried, and does not extend to deciding any such issues. Gallo v. Prudential Residential Services, Ltd. P'ship, 22 F.3d 1219, 1224 (2d Cir. 1994).

In Count One of the CCAC, Plaintiffs allege that Defendants violated Section 10(b) of the Securities Exchange Act of 1934. §§15 U.S.C. 78a et seq. (the "Exchange Act"), and Rule 10b-5(b) promulgated thereunder, by making material misrepresentations and omissions as to the cardiovascular safety of Celebrex and Bextra throughout the Class Period. In Count Two, Plaintiffs allege that Defendants McKinnell, LaMattina and Katen violated Section 20(a) of the Exchange Act. In Count Three, Plaintiffs allege that Defendants McKinnell, LaMattina and Katen violated Section 20A of the Exchange Act in connection with their trading in Pfizer common stock.

Count One: Section 10(b) Violation

Section 10(b) and Rule 10b-5 make it unlawful for any person 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 the light of the circumstances under which they were made, not misleading." 17 C.F.R. 240.10b-5. To establish a Section 10(b) violation, Plaintiffs must prove the following: (1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation." Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008). Defendants argue that they are entitled to summary judgment dismissing Plaintiffs' Section 10(b) ...


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