United States District Court, S.D. New York
AMAR SINGH, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
HANS G.C.P. SCHIKAN, BERNDT A.E. MODIG, GILES V. CAMPION, COLLEEN A. DEVRIES, LUC M.A. DOCHEZ, REMI DROLLER, DAAN ELLENS, PETER GOODFELLOW, MARTIJN KLEIJWEGT, DAVID MOTT, PATRICK VAN BENEDEN, J.P. MORGAN SECURITIES LLC, CITIGROUP GLOBAL MARKETS INC., LEERINK SWANN LLC (N/K/A LEERINK PARTNERS LLC), WEDBUSH SECURITIES INC., KBC SECURITIES USA INC., TROUT CAPITAL LLC, AND PROSENSA HOLDING N. V. Defendants.
MEMORANDUM AND ORDER
NAOMI REICE BUCHWALD, District Judge.
These actions are brought under Sections 11 and 15 of the Securities Exchange Act of 1933 against Prosensa Holding N.V. ("Prosensa"), its underwriters, and certain of its officers and directors (collectively, "defendants"), on behalf of a purported class of investors who purchased or otherwise acquired shares of Prosensa pursuant to the Registration Statement issued in connection with the company's June 2013 initial public offering. Presently before the Court is defendants' motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, this motion is granted.
I. Factual Background
A. DMD and Drisaspersen
Duchenne muscular dystrophy ("DMD") is a rare neuromuscular disorder that causes progressive muscle loss, leading to severe disability and premature death. Id. ¶ 48. It is triggered by a genetic mutation that causes the dystrophin gene to produce inadequate amounts of dystrophin, a protein needed to keep muscles intact. Id. DMD primarily affects boys and young men, occurring in about one in 3500 boys worldwide. Id. ¶ 49. The main sign of DMD is worsening muscle weakness, with symptoms generally appearing between one and four years of age. Id. Affected children experience developmental delays and most require fulltime wheelchair use by age twelve. Later in the disease's progression, respiratory muscles weaken and cardiac function is impacted, making the disease "universally fatal." The average life expectancy for one diagnosed with DMD is twenty-seven years. Id. ¶¶ 50-51. There are currently no approved DMD diseasemodifying therapies. Id. ¶ 51.
Prosensa is a biotechnology company based in Leiden, Netherlands, that "engages in the discovery and development of RNA-modulating therapeutics for the treatment of genetic disorders." Id. ¶¶ 2, 45. In 2003, it entered into an exclusive licensing agreement with the Leiden University Medical Center that allowed Prosensa use of the Center's "proprietary RNA modulation exon-skipping technology" in developing treatments for DMD. Id. "Drisaspersen, " Prosensa's lead product, is intended to treat DMD by skipping exon 51 for the dystrophin gene with the help of this technology. Id. ¶ 55.
In October 2009, Prosensa announced a development partnership with GlaxoSmithKline ("GSK"), under which GSK received exclusive rights to develop and license drisasperson. Id. As part of this collaboration, GSK was responsible for "fund[ing] and conduct[ing] the clinical development and commercialization of drisaspersen, " and had "complete control over such activities." Reg. Stmt. at 10. See also id. at 11 ("GSK will fund all our costs and expenses associated with the further clinical development of, and has sole decision-making authority and is responsible for all research, development, regulatory, manufacturing, marketing, advertising, promotional, launch and sales and other commercial activities in connection with drisaspersen.... GSK has the right to make decisions regarding the development and commercialization of product candidates under the collaboration without consulting us....").
B. The Drisaspersen "DEMAND" Studies
In September 2010, GSK initiated a Phase II study of drisaspersen ("DEMAND-II"), which would be completed in April 2013. Am. Cmplt. ¶¶ 7, 56. The 53-participant, 48-week trial compared two different doses of drisaspersen with a placebo. Reg. Stmt. at 91. The trial's primary endpoint was defined as "the distance walked in the six minute walk test (or 6MWD') between the placebo group and the continuous active-treatment group at a dose of six mg/kg/week after twenty-four weeks." Id.
In December 2010, GSK began a Phase III study ("DEMAND-III"), with results expected to be announced in the fourth quarter of 2013. Id. ¶ 8. The study was a randomized, double-blind, placebo-controlled trial, assessing drisapersen at a dose of six mg/kg/week in 186 boys with a primary endpoint of the 6MWD at forty-eight weeks. Id.
Notably, DEMAND-III had lessened enrollment criteria as compared to DEMAND-II. "For example, the DEMAND-II study only enrolled boys capable of standing up from the floor in seven seconds or less, whereas the DEMAND-III study had no maximum time for standing up. The lessening of the enrollment criteria resulted in the subject children being older and having more advanced DMD than those subjects in the DEMAND-II study." Id. ¶ 9. See Reg. Stmt. at 93 ("A total of 53 DMD subjects aged 5 and above with a rise from the floor of less than 7 seconds were recruited [for DEMAND-II]."); id. at 94 ("The [DEMAND-III] study assesses... drisaspersen... in 186 boys over five years of age and with a minimum 6MWD of 75 meters at enrollment."). DEMAND-III also utilized a wider range of locations and new testing sites. "In fact, the DEMAND-III study was conducted at 44 centers in 19 countries (compared to the DEMAND-II study which was conducted at only 13 centers)." Am. Cmplt. ¶ 11.
In April 2013, following the completion of the DEMAND-II trial, Prosensa and GSK presented abbreviated results from the study. Id. ¶ 57. The companies announced that drisaspersen had conferred a significant difference in walking distance compared to the placebo, specifically reporting a 117-foot difference in the distance walked in six minutes between those treated with drisaspersen versus placebo. Id.
While undertaking these clinical trials, Prosensa faced increasing competition from Sarepta Therapeutic's "eteplirsen, " which was also in clinical trials at the time of Prosensa's IPO and was acknowledged in the Registration Statement as its key DMD competitor. Id. ¶ 64. In particular, on June 19, 2013, nine days before Prosensa's planned initial public offering, Sarepta reported a continued sustained benefit in walking distance through eighty-four weeks of its phase 2b, 12-person study. Id. ¶ 69.
C. The Registration Statement
In anticipation of its initial public offering, Prosensa filed a Registration Statement with the SEC on May 24, 2013, and filed six subsequent amendments, the last of which was filed on June 27, 2013. Id. ¶ 74. The Registration Statement provided investors with background on DMD, tracking "the natural history of the disease" (the progression of a disease process in an individual over time), and explaining the use of the 6MWD in assessing DMD's natural history. Id. ¶¶ 59-61. It also included a graph, which served as a "[c]onceptual representation of 6-minute walking distance performance by DMD patients and healthy controls, " illustrating "the typical decline in 6MWD performance by boys with DMD over age 7." Id. ¶ 63; Reg. Stmt. at 89.
With regard to DEMAND-II, it stated that "[a] Phase II placebo-controlled study of drisapersen in 53 DMD patients was completed and demonstrated a statistically significant and clinically important difference in the primary endpoint, which was the distance walked in the six minute walk test, or 6MWD, between the placebo group and the continuous active-treatment group at a dose of 6 mg/kg/week after 24 weeks. This clinically meaningful benefit was maintained after 48 weeks of treatment, and drisapersen was well tolerated throughout the duration of this study." Am. Cmplt. ¶ 58; Reg. Stmt. at 1. Later in the Registration Statement, it provided more details about the design and implementation of the study, explaining that "GSK initiated this exploratory placebo-controlled study of drisaspersen at a 6mg/kg (subcutaneous) dose in September 2010. The study ...