The opinion of the court was delivered by: Marsha J. Pechman U.S. District Judge
ORDER ON MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED CLASS ACTION COMPLAINT
The above-entitled Court, having received and reviewed:
1. Motion to Dismiss Plaintiffs' First Amended Class Action Complaint (Dkt. No. 86)
2. Defendants' Request for Judicial Notice (Dkt. No. 87)
3. Lead Plaintiff's Opposition to Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint (Dkt. No. 91)
4. Lead Plaintiff's Opposition to Defendants' Request for Judicial Notice (Dkt. No. 92)
5. Defendants' Reply in Support of Their Motion to Dismiss Plaintiffs' First Amended Class Action Complaint (Dkt. No. 94)
and all attached exhibits and declarations, makes the following ruling:
IT IS ORDERED that the motion is PARTIALLY GRANTED and PARTIALLY DENIED; the insider trading claim and 10(b)/10b-5 claims against Defendant Gold are DISMISSED; the remainder of the motion is DENIED.
IT IS FURTHER ORDERED that Plaintiffs will be granted leave to amend to correct the deficiencies noted in this Order. The amended complaint must be filed no later than January 5, 2009.
Defendant Dendreon Corporation ("Dendreon") is a biotech company focused on development of cancer treatments. FAC ¶¶ 2, 24. Its premier product is "an active cellular immunotherapy for advanced prostrate cancer" called Provenge. FAC ¶¶ 41-42. In November 2006, Dendreon submitted a Biologics License Application ("BLA") concerning Provenge to the Food & Drug Administration ("FDA"), which granted the application "Priority Review status" and a promise of a decision in 6 months' time (by May 15, 2007). FAC ¶ 43.
A critical part of the BLA process is a Chemistry, Manufacturing & Controls ("CMC") inspection, a detailed assessment of the applicant's manufacturing facility. Def. Ex. A at 12-13. At the conclusion of the CMC inspection of Dendreon's facility (in mid-February 2007), the inspectors issued a "Form 483," an "Inspectional Observations Report" which is not issued unless there are "significant objectionable conditions" at a facility. FAC ¶¶ 47, 60. Failure to correct the deficiencies noted in a Form 483 can result in withholding or delaying approval of the BLA. FAC ¶¶ 5, 45, 50.
In the wake of the Form 483, Dendreon did a number of things to which Plaintiffs object, among them issuing a Form 10-K for 2006 and a series of press releases, none of which made mention of the February 2007 inspection of their manufacturing site.*fn1 FAC ¶¶ 60-70.
On March 29, 2007, Dendreon held a conference call with investors and securities analysts (following an FDA announcement of preliminary advisory committee recommendations that Provenge was both safe and efficacious). During the course of the call, Defendant Gold (President and CEO of Dendreon) mentioned (for the first time, according the amended complaint) that "the FDA came out and we hosted them for preapproval inspections at our Hanover, New Jersey, facility." FAC ¶ 75. An analyst then asked: "Okay. Those facilities obviously passed the muster, or can you give us more insight?"
Defendant Urdal (Chief Science Officer) responded to the question: "Actually, those are activities that we'll be discussing with the agency between now and the PDUFA ["Prescription Drug User Fee Act"] date so it's actually, we hosted a good inspection, I think, and we have ongoing discussions between now and between [sic] May 15, to finish the review of the CMC section." FAC ¶ 77 (emphasis supplied). Again, as with the Form 10-K and the press releases, no mention was made of the Form 483.
During the course of that same conference call, Defendant Gold indicated to the participants: "I think the Company has always taken it very much to heart that we want to keep the investment community up to speed and up to date on the information, so as we learn more from the FDA in our discussions with them, we'll let you know." FAC ¶ 83. Plaintiffs also point to Gold's statements during the conference:
1. "[O]ver the next several weeks we'll be finalizing our discussion with the FDA and we anticipate a decision on Provenge by May 15";
2. "[R]eally over the next several weeks, we're working on completing our discussions with the FDA and anticipate a decision on Provenge by May 15, 2007"; and
3. "I can give you the classic line that the FDA typically follows the advisory committee's recommendation. Obviously we look forward to continuing our discussions and working very closely with the FDA over the next several weeks up to our May 15 PDUFA date." FAC ¶¶ 85-86.
Plaintiffs characterize these statements as "materially misleading when made." FAC ¶ 86. The day after the conference call (March 30, 2007), shares of Dendreon traded heavily and the price of the stock rose as much as 343%. FAC ¶ 12.
Four days later (April 2, 2007), Defendant Gold sold 24% of his stock holdings in the company for a total of approximately $2.7 million. Gold had never sold any of his shares prior to that point. FAC ¶ 13.
On May 8, 2007, the FDA issued a "Complete Response Letter" to Dendreon which rejected their request to approve Provenge and cited two reasons for doing so, one of which was the still-unresolved CMC issues. The other (according to Dendreon's May 9 press release) was the agency's need for "additional clinical data in support of the efficacy claim." FAC, ¶ 94; Def. Ex. G, G-7. In support of their characterization regarding the misleading nature of Defendant Gold's earlier statements, Plaintiffs point to Gold's May 10, 2007 statement (following the issuance of the Complete Response Letter) that "[t]here ...