12CV3071 CAB KSC - Shareholders Foundationshareholdersfoundation.com/system/files/complaints/... · Isis Pharmaceuticals, Inc. (“Isis” or the “Company”), analysts’ reports

Case 3:12-cv-03071-CAB-KSC Document 1 Filed 12/28/12 Page 1 of 23

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

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Individually and On Behalf of All Others Similarly Situated,

Plaintiff,

v.

ISIS PHARMACEUTICALS, INC., STANLEY T. CROOKE, B. LYNNE PARSHALL, and RICHARD S. GEARY,

Defendants.

Case No. '12CV3071 CAB KSC

CLASS ACTION

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

DEMAND FOR JURY TRIAL

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COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

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1 CLASS ACTION COMPLAINT

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Plaintiff, individually and on behalf of all other persons similarly situated, by his

3 undersigned attorneys, for his complaint against defendants, alleges the following based upon

4 personal knowledge as to himself and his own acts, and information and belief as to all other

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6 matters, based upon, inter alia, the investigation conducted by and through his attorneys,

7 which included, among other things, a review of the defendants’ public documents,

8 conference calls and announcements made by defendants, United States Securities and

9 Exchange Commission (“SEC”) filings, wire and press releases published by and regarding

10 Isis Pharmaceuticals, Inc. (“Isis” or the “Company”), analysts’ reports and advisories about

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12 the Company, and information readily obtainable on the Internet. Plaintiff believes that

13 substantial evidentiary support will exist for the allegations set forth herein after a reasonable

14 opportunity for discovery.

15 NATURE OF THE ACTION 16

1. This is a federal securities class action on behalf of a class consisting of all 17

18 persons other than defendants who purchased Isis securities between March 29, 2012 and

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October 15, 2012, inclusive (the “Class Period”), seeking to recover damages caused by

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defendants’ violations of the federal securities laws and to pursue remedies under the

21 Securities Exchange Act of 1934 (the “Exchange Act”)

22 2. Isis attempts to discover and develop novel human therapeutic compounds. The

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24 Company currently has various compounds in clinical trials for a variety of diseases such as

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Crohn’s disease, psoriasis, asthma, and cancer. Isis’ medical chemistry and biology research

26 programs support efforts in both antisense and small molecule drug delivery.

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COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 1 -


1 3. Throughout the Class Period, Defendants conditioned investors to believe that

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I the Kynamro (mipomersen sodium), for the treatment of patients with Homozygous Familial

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Hypercholesterolaemia (“HoFH”), would receive approval from the U.S. Food and Drug

4 Administration (“FDA”) through a host of materially false and misleading statements

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6 regarding the safety and efficacy of the product, as well as reportedly positive results from

7 Kynamro’s clinical trials. As a result of the foregoing, the Company’s statements were

8 materially false and misleading at all relevant times.

9 4. On October 16, 2012, two days prior to a meeting of the Endocrinologic and

10 Metabolic Drugs Advisory Committee of the U.S. Food and Drug Administration (“FDA”) to

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12 decide on whether to recommend Kynamro for FDA approval, the FDA published a clinical

13 briefing document questioning the safety and efficacy of Kynamro. Specifically, the report

14 noted that abnormal growths or neoplasms developed in 3.1% of patients treated with

15 Kynamro, as compared to only 0.9% of patients who took a placebo; and that the data

16 submitted by the Company was limited by a small sample size and a short treatment time.

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18 The FDA report concluded that this “imbalance in neoplasms will need to be assessed further

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in on-going and future studies and post-marketing (if approved).” In addition, the report

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found that three patients treated with Kynamro died during the clinical testing. Two died of

21 heart attacks and the other patient died of acute liver failure, and the report concluded that

22 “the potential for a contributing effect of mipomersen cannot be ruled out.”

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24 5. As a result of this disclosure, Isis shares declined $2.88 per share or nearly 22%,

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to close at $10.27 per share on October 16, 2012.

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1 6. As a result of Defendants’ wrongful acts and omissions, and the precipitous

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I decline in the market value of the Company’s securities, Plaintiff and other Class members

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have suffered significant damages.

4 JURISDICTION AND VENUE

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6 7. The claims asserted herein arise under and pursuant to Sections l0 (b) and 20(a)

7 of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule l0b-5 promulgated thereunder

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by the SEC, 17 C.F.R § 240.10b-5.

9 8. This Court has jurisdiction over the subject matter of this action pursuant to 28

10 U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

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12 9. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and

13 28 U.S.C. § 1391(b). Isis maintains its principal place of business in this District and many of

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the acts and practices complained of occurred in substantial part herein.

15 10. In connection with the acts alleged in this complaint, Defendants, directly or

16 indirectly, used the means and instrumentalities of interstate commerce, including, but not

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18 limited to, the mails, interstate telephone communications, and the facilities of the national

19 securities markets.

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PARTIES

21 11. Plaintiff, as set forth in the accompanying certification, incorporated by reference

22 herein, purchased Isis securities at artificially inflated prices during the Class Period and was

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24 damaged thereby.

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12. Defendant Isis is a corporation organized under the laws of the state of Delaware,

26 maintaining its principal place of business at 1896 Rutherford Road, Carlsbad, CA 92008-

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1 7326. Isis’s common stock trades on the NASDAQ Global Stock Market (“NASDAQ”) under

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I the ticker symbol “ISIS.”

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13. Defendant Stanley T. Crooke (“Crooke”) at all relevant times has served as the

4 Company’s President, Chief Executive Officer (“CEO”) and Chairman of the Board of

5 Directors.

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7 14. Defendant B. Lynne Parshall (“Parshall”) at all relevant times has served as the

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Company’s Vice President and Chief Financial Officer, Chief Operating Officer and

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10 15. Defendant Richard S. Geary (“Geary”) at all relevant times has served as the

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12 Company’s Senior Vice President of Development.

13 16. The defendants referenced above in ¶¶13 - 15 are referred to herein as the

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“Individual Defendants.”

15 SUBSTANTIVE ALLEGATIONS 16

BACKGROUND 17

18 17. Isis is the leading company in antisense drug discovery and development,

19 exploiting a novel drug discovery platform it created to generate a broad pipeline of first-in-

20 class drugs. Antisense technology provides a direct route from genomics to drugs. The

21 Company’s strategy is to discover unique antisense drugs and develop these drugs to key

22 clinical value inflection points.

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24 18. In January 2008, the Company entered into a strategic alliance with Genzyme

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Corporation, a Sanofi company (“Genzyme”) focused on the licensing and co-development of

26 Kynamro and a research relationship. The license and co-development agreement provides

27 Genzyme with exclusive worldwide rights for all therapeutic purposes to its patents and

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know-how related to Kynamro, including the key product related patents, and their foreign

equivalents pending or granted in various countries outside the United States, including in the

European Union, Japan, Canada, Australia, South Africa and India. The transaction included

a $175 million licensing fee, a $150 million equity investment in the Company’s stock in

which it issued Genzyme five million shares of its common stock, and a share of worldwide

profits on Kynamro and follow-on drugs ranging from 30 percent to 50 percent of all

commercial sales. In May 2012, the Company earned a $25 million milestone payment from

Genzyme when the FDA accepted the NDA for Kynamro. The Company may also receive

over $1.5 billion in substantive milestone payments if Kynamro achieves pre-specified events,

including up to $725 million for the achievement of regulatory milestones and up to $825

million for the achievement of commercialization milestones. The next milestone payment

the Company could earn under the agreement with Genzyme is $25 million, in the event the

FDA approves the New Drug Application (“NDA”) for Kynamro.

MATERIALLY FALSE AND MISLEADING STATEMENTS MADE DURING THE CLASS PERIOD

19. On March 29, 2012, the Company issued a press release announcing the results

from a phase 3 long-term extension study of Kynamro. Specifically, the Company stated the

following, in relevant part:

In the study, patients treated with KYNAMRO TM for two years maintained robust reductions in LDL-C and all other Apo B containing atherogenic lipoproteins measured with a safety profile consistent with the phase 3 studies of KYNAMROTM.

Data presented today included 141 patients who enrolled in the study after having completed one of the three phase 3 studies: homozygous FH, severe hypercholesterolemia, or the heterozygous FH. These studies were six months long and required patients to be on stable maximally tolerated lipid-lowering



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therapy throughout the study. To date, 63 patients remain on or have completed treatment with 40 patients consenting to participate for another two years of treatment - a total of four years of treatment.

In this study, sustained reductions in LDL-C with a mean reduction of 28 percent in LDL-C at six months and at two years were observed in patients treated with KYNAMROTM. Changes in liver fat were observed in some patients where the overall median change stabilized and then declined with continued treatment. The median change from baseline in percent liver fat increased from 5 percent at 26 weeks, to 13 percent at 52 weeks, and returned to 5 percent at 104 weeks. Results represent those patients in the extension study at each assessment period: 60 patients at 26 weeks, 31 patients at 52 weeks, and 39 patients at 104 weeks. The median change reflects both patients who continued at full dose as well as those with dose adjustments and dose interruptions. Upon treatment discontinuation, changes in liver fat returned towards normal.

“These data show that robust LDL-C reductions are seen in patients treated for 2 years and more. Liver fat may increase in some patients but in this long term study the median fat fraction is seen to stabilize and decline with time as measured by MRI,” said study investigator Raul D. Santos, M.D., Ph.D., Director of the Lipid Clinic of the Heart institute, Instituto do Coração, Hospital das Clínicas, São Paulo, Brazil. “These results are encouraging and support the potential for effective and safe long-term use in patients with the most aggressive forms of FH.”

Genzyme and Isis have completed the four phase 3 studies that are included in the European submission and will be included in the U.S. submission. In these studies, the most commonly observed adverse events were injection site reactions and flu-like symptoms. The long-term data demonstrate a safety and efficacy profile consistent with phase 3 findings.

20. Later in the day, the Company issued a press release announcing the submission

of a New Drug Application (“NDA”) with the FDA seeking approval of Kynamro

(mipomersen sodium) for the treatment of patients with HoFH. The Company stated the


“HoFH patients have aggressive, life-threatening cardiovascular disease starting at birth because of genetic mutations which severely impair LDL clearance and also trigger an overproduction of all atherogenic lipoproteins,” said Christie M. Ballantyne, M.D., Chief of the Sections of Cardiology and Cardiovascular Research, and Professor of Medicine and Genetics, Baylor College of Medicine. “Currently available therapies work on clearance whereas KYNAMRO TM



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uniquely targets Apo B production and production of all Apo B-containing, atherogenic lipoproteins, including VLDL, LDL, and Lp(a). Current options reserved for these patients are mechanical procedures such as LDL-aphereis or liver transplant.”

“This submission marks the second of two key milestones for the KYNAMRO TM program including the submission of the EU marketing authorization application last year.” said Vice President and General Manager of Genzyme’s Cardiovascular Business, Paula Soteropoulos. “These are important steps toward our goal of bringing an innovative solution to patients in great need of a novel, targeted therapy.”

The FDA submission for KYNAMROTM is supported by the largest clinical trial conducted to date in the HoFH patient population. In the randomized, double-blind, placebo controlled, multi-center trial, significant reductions were observed in all atherogenic lipoproteins evaluated (including LDL-C, Apo B and Lp(a)) for patients receiving KYNAMROTM who are already receiving a regimen of maximally tolerated lipid-lowering therapies including statins. Three patients (12 percent) treated with KYNAMROTM withdrew due to adverse events. Consistent with other studies evaluating KYNAMROTM, commonly observed adverse events included mild to moderate injection site reactions and flu-like symptoms, as well as elevations in liver transaminases.

Isis will receive a $25 million milestone payment from Genzyme following FDA acceptance of the NDA submission. Provided the necessary approvals are granted, mipomersen would be marketed under the brand name KYNAMRO TM, the name that has been submitted to health authorities for the investigational agent. The FDA has granted mipomersen Orphan Drug designation for the treatment of patients with HoFH.

“The last twelve months have been very successful for the KYNAMRO TM program,” said B. Lynne Parshall, J.D., Chief Operating Officer, Chief Financial Officer and Secretary of Isis. “We look forward to working with the U.S. and EU regulatory authorities to bring this treatment to patients in need.”

21. On May 8, 2012, the Company announced its financial results for its first quarter

ended March 31, 2012. In the press release, Defendant Parshall stated the following, in

relevant part:

"Already in 2012, we have had multiple important accomplishments. Our partners at Genzyme submitted the KYNAMROTM new drug application (NDA) to the FDA. With this submission, we are one step closer to commercializing KYNAMRO for patients who are at great risk of dying from their cardiovascular disease. In addition, the European regulatory review is



proceeding as planned, and Genzyme is actively preparing to launch KYNAMRO. The commercialization of KYNAMRO will be an important milestone for Isis. Not only does it represent the commercialization of the first systemic antisense drug, but it also represents the opportunity to significantly change our financial position by adding commercial revenue," said B. Lynne Parshall, COO and CFO of Isis.

"In 2012, we are looking forward to a watershed event for Isis: the commercial launch of KYNAMRO. KYNAMRO is an important drug for many reasons. It should be the first systemic antisense drug on the market and it will be Isis' first important commercial asset. Most importantly, it is a drug that has the potential to help seriously ill patients with severe FH in desperate need of a lifesaving therapy," continued Ms. Parshall. "We recently reported data from our long-term extension study in patients who have been treated with KYNAMRO for two years and longer. In these patients, we continue to see sustained and robust reductions of LDL-cholesterol and other key atherogenic lipids with a safety profile that supports our plan to treat patients who are at very high risk of a cardiovascular-related death. While our initial registration dossiers are filed in the United States and Europe, we and Genzyme continue to invest to expand the commercial potential of KYNAMRO. We initiated a study called FOCUS FH late last year designed to support the addition of severe heterozygous FH to the label for KYNAMRO."

22. On May 9, 2012, the Company filed a quarterly report with the SEC on a Form

10-Q for the first quarter ended March 31, 2012 which was signed by Defendants Crooke and

Parshall. In addition, the Form 10-Q contained certifications pursuant to the Sarbanes-Oxley

Act of 2002 (“SOX”) signed by Defendants Crooke and Parshall, stating that the financial

information contained in the Form 10-Q was accurate and that they disclosed any material

changes to the Company’s internal control over financial reporting. The 10-Q represented the


Our flagship product, KYNAMRO (formerly mipomersen), is moving closer to the market for patients with severe forms of familial hypercholesterolemia, or FH, at high cardiovascular risk, who cannot reduce their low-density lipoprotein cholesterol, or LDL-C, sufficiently with currently available lipid-lowering therapies. In July 2011, Genzyme submitted a marketing application in Europe for KYNAMRO for patients with homozygous familial hypercholesterolemia, or hoFH, and severe heterozygous familial hypercholesterolemia, or severe heFH. In March 2012, Genzyme submitted the

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U.S. application for marketing approval for patients with hoFH. Genzyme is actively preparing to launch KYNAMRO subject to marketing approval. Genzyme is also preparing to commercialize KYNAMRO in other major markets.

23. On May 29, 2012, the Company issued a press release announcing that the FDA

accepted for filing the NDA for Kynamro for the treatment of HoFH. The press release stated

the following in relevant part:

“We believe that KYNAMRO TM has the potential to bring real benefit to patients in the United States with HoFH who are unable to adequately control their LDL-C with currently available treatments,” said B. Lynne Parshall, Chief Operating Officer and CFO of Isis. “The successes of our joint development efforts for KYNAMROTM are evident in the significant progress made in bringing this important new drug to the regulatory agencies for review. We are pleased to have earned the first regulatory milestone payment for KYNAMRO TM from this collaboration.”

The FDA submission for KYNAMROTM is supported by the largest clinical trial conducted to date in the HoFH patient population. In the randomized, double-blind, placebo controlled, multi-center trial, significant reductions were observed in all atherogenic lipoproteins evaluated (including LDL-C, Apo B and Lp(a)) for patients receiving KYNAMROTM who are already receiving a regimen of maximally tolerated lipid lowering therapies including statins. Three patients (12 percent) treated with KYNAMROTM withdrew due to adverse events. Consistent with other studies evaluating KYNAMROTM, commonly observed adverse events included mild to moderate injection site reactions and flu-like symptoms, as well as elevations in liver transaminases.

24. On August 3, 2012, the Company issued a press release announcing the approval

by the European Medicines Agency (“EMA”) of its manufacturing facility. The press release

stated the following in relevant part:

Isis Pharmaceuticals, Inc. (NASDAQ: ISIS) announced today that it has successfully completed a pre-approval inspection of its manufacturing facility located in Carlsbad, California. As part of the inspection, the European Medicines Agency (EMA) conducted an extensive review of Isis' manufacturing facility and processes and Isis' Good Manufacturing Practices (GMP) Quality systems to ensure product manufactured is of appropriate and reliable quality. The EMA's approval of the Isis manufacturing facility allows Isis to supply Genzyme with KYNAMROTM drug substance to support commercial launch in Europe.



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"Isis is the leading antisense drug discovery company with a broad pipeline of more than two dozen drugs in development. As we have increased the efficiency of our drug discovery technology, we have also improved the manufacturing processes of antisense drugs. As a result, we have significantly reduced the cost of manufacturing and increased our capacity, which will support the numerous potential commercial products that could be coming out of our pipeline in the near-term," said B. Lynne Parshall, J.D., Chief Operating Officer, Chief Financial Officer and Secretary of Isis. "The European regulatory approval of our manufacturing facility is an important milestone for Isis and a validation of our high standards and excellence in manufacturing antisense drugs. This approval is also an essential step in a successful commercial KYNAMROTM launch in Europe. We expect the FDA to conduct a similar inspection later this year."

Isis is the leader in manufacturing oligonucleotide drugs and an inventor of proprietary inventions that support many aspects of oligonucleotide drug manufacturing, including improving manufacturing efficiency and capacity. Isis adheres to strict GMP conditions and operates a state-of-the-art, commercial-scale manufacturing facility that is capable of producing a number of different clinical drugs, including drugs to support the preclinical, clinical and initial commercial needs for Isis and its partners.

25. On August 6, 2012, the Company announced financial results for its second

quarter ended June 30, 2012. In the press release, Defendant Parshall stated the following, in

relevant part:

"The planned European and United States launches of KYNAMROTM will be important milestones for Isis and for antisense technology. KYNAMROTM commercialization will change our financial position by adding commercial revenue to the steady stream of income we receive from our partnerships," said B. Lynne Parshall, Chief Operating Officer and CFO of Isis. "We have maintained a strong financial position as we have approached this important event while also advancing the rest of our pipeline. We have utilized an innovative and unique business model that has provided us with the cash to expand and mature our industry-leading pipeline. As we look toward the future, in addition to KYNAMROTM commercial revenue, we have other significant near-term opportunities for continued revenue growth with a wave of potential product launches in the next three to five years. We also look forward to completing clinical studies on several drugs that could be very attractive licensing candidates."


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26. On August 6, 2012, the Company filed a quarterly report with the SEC on a Form

10-Q for the first quarter ended June 30, 2012 which was signed by Defendants Crooke and

Parshall. In addition, the Form 10-Q contained certifications pursuant to SOX signed by

Defendants Crooke and Parshall, stating that the financial information contained in the Form

10-Q was accurate and that they disclosed any material changes to the Company’s internal

control over financial reporting. The 10-Q represented the following, in relevant part:

Our flagship product, KYNAMRO TM (formerly mipomersen), is moving closer to the market for patients with severe forms of familial hypercholesterolemia, or FH, at high cardiovascular risk, who cannot reduce their low-density lipoprotein cholesterol, or LDL-C, sufficiently with currently available lipid-lowering therapies. In July 2011, Genzyme submitted a marketing application in Europe for KYNAMRO TM for patients with homozygous familial hypercholesterolemia, or hoFH, and severe heterozygous familial hypercholesterolemia, or severe heFH. In May 2012, the U.S. Food and Drug Administration, or FDA, accepted the marketing application for KYNAMRO TM for patients with hoFH. Genzyme is actively preparing to launch KYNAMRO TM subject to marketing approval. Genzyme is also preparing to commercialize KYNAMRO TM in other major markets.

27. The statements referenced in ¶¶ 19-26 above were materially false and/or

misleading because they misrepresented and failed to disclose that Kynamro’s clinical trials

could not sufficiently demonstrate the drug’s safety and efficacy, as they were not properly

designed and had insufficient safety data to explain safety signals that arose during the trials.

THE TRUTH IS REVEALED

28. On October 16, 2012, the FDA published a clinical briefing document raising

concerns regarding the safety and efficacy of Kynamro. Specifically, the report noted that:

1) abnormal growths or neoplasms developed in 3.1% of patients treated with Kynamro, as compared to only 0.9% of patients treated with placebo; 2) the data submitted by the Company was limited by both a small sample size and short duration of treatment; and 3) three patients treated with Kynamro died during the clinical testing; two died of heart attacks and the other patient died of acute liver failure, with the report concluding that “the potential for a


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contributing effect of mipomersen cannot be ruled out. The report concluded the following in relevant part:

Discontinuations In the pooled Phase 3 trials, a total of 391 individuals were randomized to double-blind treatment (261 mipomersen, 130 placebo). Discontinuations were higher in mipomersentreated individuals (28.0%; 73/261) as compared with placebo-treated individuals (6.9%; 9/130). The most common reason for discontinuation was due to adverse events (AEs): 18.0% (47/261) of mipomersen-treated individuals and 2.3% (3/130) of placebo-treated individuals discontinued due to an AE or serious adverse event (SAE). In Trial ISIS 301012-CS5 (individuals with HoFH), 82% of individuals completed treatment and discontinuation rates due to AEs or SAEs were 11.8% (4/34) in mipomersen-treated individuals and 0.0% in placebo-treated individuals. Across the other three supportive trials, the percentage of mipomersen-treated individuals who discontinued treatment ranged from 12 to 43%, compared to placebo, which ranged from 0 to 15%. In the open-label extension (OLE) trial ISIS 301012-CS6, 77 of 141 (54.6%) individuals discontinued treatment: 43.3% (61/141) due to an AE or SAE, 11 (7.8%) withdrew consent, 2 (1.4%) due to lack of efficacy, 2 (1.4%) due to physician’s decision, and 1 (0.7%) due to pregnancy. In individuals with HoFH treated in OLE trial ISIS 301012-CS6, 60.5% (23/38) of individuals discontinued treatment, 47.4% (18/38) due to an AE or SAE, 4 (10.5%) withdrew consent, and 1 (2.6%) due to pregnancy. Thus, the discontinuation rates in the HoFH extension trial are high with 23 of the 38 (61%) individuals discontinuing, of which 78% of the discontinuations (18/23) are from AEs or SAEs. The overall incidence of discontinuation in the pooled Phase 3 population is also high with 77 of the 141 (55%) individuals discontinuing, of which 79% of the discontinuations (61/77) were from AEs or SAEs. This high discontinuation rate from adverse events is problematic for a therapy that needs to be taken chronically.

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At the System Organ Class (SOC) level, a slightly greater percentage of HoFH individuals in ISIS 301012-CS5 had Serious Adverse Events (SAEs) of Cardiac Disorders in the mipomersen-treated group (2.9%, 1/34) as in the placebo group (0%, 0/17). At the SOC level, more individuals in the pooled Phase 3 trials had Serious Adverse Events (SAEs) of Cardiac Disorders in the mipomersen-treated group (3.8%, 10/261) than in the placebo group (3.1%, 4/129).

At the SOC level, more individuals in the pooled Phase 3 trials had Cardiac Disorders in the mipomersen-treated group than in the placebo group (9.2% vs. 6.2%), respectively. In the Cardiac Disorders SOC, a greater number of disorders occurred in the mipomersen-treated group as compared to the placebo group in ISIS 301012-CS5 [4 (11.8%) vs 0] and in MIPO3500108 [5 (12.8%)



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vs 1 (5.3%)]. Of the 4 individuals in the mipomersen group in ISIS 301012- CS5, 2 experienced angina pectoris, and 1 patient each experienced acute coronary syndrome, palpitations, and aortic valve disease. The relevant preferred term events for MIPO108 were angina pectoris, coronary artery disease, acute myocardial infarction, angina unstable, cardiac failure, prinzmetal angina, and supraventricular extrasystoles.

There was no evidence for a decrease in cardiovascular events in the mipomersen group as compared to the placebo group in these trials. Based on the data submitted in this application, the possibility that mipomersen therapy increases the risk for cardiovascular events cannot be excluded.

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Deaths Four deaths have been reported across the mipomersen clinical program as of March 2012. Three deaths occurred in individuals in the mipomersen group and occurred during the 6-month post-treatment follow-up period. Two deaths were attributed to myocardial infarction and one to acute hepatic failure. One death due to acute myocardial infarction occurred in a patient in the placebo group during the 6-month on-treatment period.

The fulminant hepatic failure death occurred in a 68-year-old male with HeFH who received 26 injections of mipomersen and completed the treatment period of the trial. He developed elevated hepatic transaminases during the trial, which resolved by the end of the treatment period. He was found on MRI to have severe hepatic steatosis by the end of the trial. His death from hepatic failure was confounded by his presentation with a myocardial infarction event as well as his history of alcohol and acetaminophen use, but the potential for a contributing effect of mipomersen cannot be ruled out.

Serious Adverse Events Eight percent (21/261) of mipomersen-treated individuals and 5% (7/129) of placebo-treated individuals experienced at least one SAE. The most frequently reported SAEs were Cardiac Disorders, occurring in 3.8% (10/261) of mipomersen-treated individuals and 3.1% (4/129) of placebo-treated individuals. One mipomersen-treated individual had SAEs of ALT and AST elevation and hepatic steatosis. Study drug was permanently discontinued due to the increase in ALT. An initial MRI scan showed incipient steatosis. The second MRI (93 days after starting mipomersen study treatment; 23 days after last dose) noted hepatomegaly and marked hepatosteatosis with changes from the previous examination. Total bilirubin, albumin, alkaline phosphatase, hsCRP, and coagulation parameters (aPTT, PT, and INR) remained within normal limits. Approximately 8 months after the ALT elevation SAE, the ALT and AST values had declined to less than 1.2 times the upper limit of normal.


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Adverse Events that Led to Discontinuation In the pooled Phase 3 population, 18% (47/261) of mipomersen-treated individuals and 2% (3/129) of placebo-treated individuals withdrew due to AEs. In the mipomersen individuals who discontinued due to an AE, injection site reactions (ISRs), flu-like symptoms (FLS), and abnormal hepatic transaminases were the major reasons. Discontinuations due to AEs were less common in ISIS 301012-CS5: 12% [4/34] of mipomersen-treated individuals and 0% of placebo-treated individuals. The AEs that most commonly leading to discontinuation in these individuals with HoFH (Rash, AST increase, Injection site pruritus, and Injection site pain) were similar to results in the pooled Phase 3 population.

Common Adverse Events In the pooled Phase 3 trials, AEs that occurred notably more frequently in the mipomersen group as compared to the placebo group include Cardiac disorders (angina pectoris, palpitations); Gastrointestinal disorders (nausea, vomiting, abdominal pain); General disorders (ISRs, flu-like symptoms such as fatigue, pyrexia, chills, and peripheral edema); Hepatobiliary disorders (hepatic steatosis); Investigations (ALT, AST or hepatic enzyme increased, liver function test abnormal); Nervous system disorders (headache, dizziness); Psychiatric disorders (anxiety, insomnia); and Vascular disorders (hypertension). By far, ISRs were the most common AEs in individuals receiving mipomersen.

29. In reaction to the FDA report, Jeffries & Co. analyst Eun Yang stated that the

disclosure regarding the tumors was “quite surprising”, and opined that Kynamro would likely

not be approved, and if it were approved, such approval would be severely limited.

30. As a result of this disclosure, Isis’ shares declined $2.88 per share, or nearly

22%, to close at $10.27 per share on October 16, 2012.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

31. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or

otherwise acquired Isis securities during the Class Period (the “Class”); and were damaged

thereby. Excluded from the Class are defendants herein, the officers and directors of the

Company, at all relevant times, members of their immediate families and their legal


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representatives, heirs, successors or assigns and any entity in which defendants have or had a

I controlling interest.

32. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Isis securities were actively traded on the

NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and

can be ascertained only through appropriate discovery, Plaintiff believes that there are

hundreds or thousands of members in the proposed Class. Record owners and other members

of the Class may be identified from records maintained by Isis or its transfer agent and may be

notified of the pendency of this action by mail, using the form of notice similar to that

customarily used in securities class actions.

33. Plaintiff’s claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants’ wrongful conduct in violation of

federal law that is complained of herein.

34. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

Plaintiff has no interests antagonistic to or in conflict with those of the Class.

35. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

• whether the federal securities laws were violated by defendants’ acts as alleged herein;

• whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Isis;

• whether the Individual Defendants caused Isis to issue false and misleading financial statements during the Class Period;

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• whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;

• whether the prices of Isis securities during the Class Period were artificially inflated because of the defendants’ conduct complained of herein; and

• whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

36. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore,

as the damages suffered by individual Class members may be relatively small, the expense

and burden of individual litigation make it impossible for members of the Class to

individually redress the wrongs done to them. There will be no difficulty in the management

of this action as a class action.

37. Plaintiff will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:

• defendants made public misrepresentations or failed to disclose material facts during the Class Period;

• the omissions and misrepresentations were material;

• Isis securities are traded in efficient markets;

• the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period;

• the Company traded on the NASDAQ, and was covered by multiple analysts;

• the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company’s securities; and

• Plaintiff and members of the Class purchased and/or sold Isis securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.

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1 38. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a

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I presumption of reliance upon the integrity of the market.

3 COUNT I

4 (Against All Defendants For Violations of

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Section 10(b) And Rule 10b-5 Promulgated Thereunder)

6 39. Plaintiff repeats and realleges each and every allegation contained above as if

7 fully set forth herein.

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9 40. This Count is asserted against defendants and is based upon Section 10(b) of the

10 Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.

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41. During the Class Period, defendants engaged in a plan, scheme, conspiracy and

12 course of conduct, pursuant to which they knowingly or recklessly engaged in acts,

13 transactions, practices and courses of business which operated as a fraud and deceit upon

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15 Plaintiff and the other members of the Class; made various untrue statements of material facts

16 and omitted to state material facts necessary in order to make the statements made, in light of

17 the circumstances under which they were made, not misleading; and employed devices,

18 schemes and artifices to defraud in connection with the purchase and sale of securities. Such

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20 scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing

21 public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate

22 and maintain the market price of Isis securities; and (iii) cause Plaintiff and other members of

23 the Class to purchase Isis securities at artificially inflated prices. In furtherance of this

24 unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions

25 set forth herein.

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27 42. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of

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the defendants participated directly or indirectly in the preparation and/or issuance of the



1 quarterly and annual reports, SEC filings, press releases and other statements and documents

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I described above, including statements made to securities analysts and the media that were

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designed to influence the market for Isis securities and options. Such reports, filings, releases

4 and statements were materially false and misleading in that they failed to disclose material

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6 adverse information and misrepresented the truth about Isis’s finances and business prospects.

7 43. By virtue of their positions at Isis, defendants had actual knowledge of the

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I materially false and misleading statements and material omissions alleged herein and intended

9 thereby to deceive Plaintiff and the other members of the Class, or, in the alternative,

10 defendants acted with reckless disregard for the truth in that they failed or refused to ascertain

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12 and disclose such facts as would reveal the materially false and misleading nature of the

13 statements made, although such facts were readily available to defendants. Said acts and

14 omissions of defendants were committed willfully or with reckless disregard for the truth. In

15 addition, each defendant knew or recklessly disregarded that material facts were being

16 misrepresented or omitted as described above.

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18 44. Information showing that defendants acted knowingly or with reckless disregard

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I for the truth is peculiarly within defendants’ knowledge and control. As the senior managers

20 and/or directors of Isis, the Individual Defendants had knowledge of the details of Isis’s

21 internal affairs.

22 45. The Individual Defendants are liable both directly and indirectly for the wrongs

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24 complained of herein. Because of their positions of control and authority, the Individual

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Defendants were able to and did, directly or indirectly, control the content of the statements of

26 Isis. As officers and/or directors of a publicly-held company, the Individual Defendants had a

27 duty to disseminate timely, accurate, and truthful information with respect to Isis’s businesses,

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1 operations, future financial condition and future prospects. As a result of the dissemination of

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I the aforementioned false and misleading reports, releases and public statements, the market

3 price of Isis securities was artificially inflated throughout the Class Period. In ignorance of

4 the adverse facts concerning Isis’s business and financial condition which were concealed by

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6 defendants, Plaintiff and the other members of the Class purchased Isis securities at

7 artificially inflated prices and relied upon the price of the securities, the integrity of the

8 market for the securities and/or upon statements disseminated by defendants, and were

9 damaged thereby.

10 46. During the Class Period, Isis securities were traded on an active and efficient

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12 market. Plaintiff and the other members of the Class, relying on the materially false and

13 misleading statements described herein, which the defendants made, issued or caused to be

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disseminated, or relying upon the integrity of the market, purchased shares of Isis securities at

15 prices artificially inflated by defendants’ wrongful conduct. Had Plaintiff and the other

16 members of the Class known the truth, they would not have purchased said securities or

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18 would not have purchased them at the inflated prices that were paid. At the time of the

19 purchases by Plaintiff and the Class, the true value of Isis securities were substantially lower

20 than the prices paid by Plaintiff and the other members of the Class. The market price of Isis

21 securities declined sharply upon public disclosure of the facts alleged herein to the injury of

22 Plaintiff and Class members.

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24 47. By reason of the conduct alleged herein, defendants knowingly or recklessly,

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I directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5

26 promulgated thereunder.

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1 48. As a direct and proximate result of defendants’ wrongful conduct, Plaintiff and

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I the other members of the Class suffered damages in connection with their respective

3 purchases and sales of the Company’s securities during the Class Period, upon the disclosure

4 that the Company had disseminated false financial statements to the investing public related to

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6 its prospects for FDA approval.

7 COUNT II

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(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants)

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10 49. Plaintiff repeats and realleges each and every allegation contained in the

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I foregoing paragraphs as if fully set forth herein.

12 50. During the Class Period, the Individual Defendants participated in the operation

13 and management of Isis, and conducted and participated, directly and indirectly, in the

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15 conduct of Isis’s business affairs. Because of their senior positions, they knew the adverse

16 non-public information regarding Isis’s NDA submission to the FDA.

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51. As officers and/or directors of a publicly owned company, the Individual

18 Defendants had a duty to disseminate accurate and truthful information with respect to Isis’s 19

financial condition and results of operations, and to correct promptly any public statements 20

21 issued by Isis which had become materially false or misleading.

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52. Because of their positions of control and authority as senior officers, the

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Individual Defendants were able to, and did, control the contents of the various reports, press

24 releases and public filings which Isis disseminated in the marketplace during the Class Period

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26 concerning Isis’s financial prospects. Throughout the Class Period, the Individual Defendants

27 exercised their power and authority to cause Isis to engage in the wrongful acts complained of

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herein. The Individual Defendants therefore, were “controlling persons” of Isis within the



1 meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the

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I unlawful conduct alleged which artificially inflated the market price of Isis securities.

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53. Each of the Individual Defendants, therefore, acted as a controlling person of

4 Isis. By reason of their senior management positions and/or being directors of Isis, each of

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6 the Individual Defendants had the power to direct the actions of, and exercised the same to

7 cause, Isis to engage in the unlawful acts and conduct complained of herein. Each of the

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Individual Defendants exercised control over the general operations of Isis and possessed the

9 power to control the specific activities which comprise the primary violations about which

10 Plaintiff and the other members of the Class complain.

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12 54. By reason of the above conduct, the Individual Defendants are liable pursuant to

13 Section 20(a) of the Exchange Act for the violations committed by Isis.

14 PRAYER FOR RELIEF

15 WHEREFORE , Plaintiff demands judgment against defendants as follows:

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17 A. Determining that the instant action may be maintained as a class action under

18 Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class

19 representative;

20 B. Requiring defendants to pay damages sustained by Plaintiff and the Class by 21

reason of the acts and transactions alleged herein; 22

23 C. Awarding Plaintiff and the other members of the Class prejudgment and post-

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judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and

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D. Awarding such other and further relief as this Court may deem just and proper.

26 DEMAND FOR TRIAL BY JURY

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28 Plaintiff hereby demands a trial by jury.



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Dated: December 28, 2012

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Documents

12CV3071 CAB KSC - Shareholders Foundationshareholdersfoundation.com/system/files/complaints/... · Isis Pharmaceuticals, Inc. (“Isis” or the “Company”), analysts’ reports