United States District Court, W.D. Washington, Seattle
SAMIT PATEL, Individually and on Behalf of All Other Persons Similarly Situated, Plaintiff,
SEATTLE GENETICS, INC., CLAY B. SIEGALL, TODD E. SIMPSON, and JONATHAN DRACHMAN, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS AND
GRANTING IN PART REQUEST FOR JUDICIAL NOTICE
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE
matter comes before the Court on Defendants' Motion to
Dismiss, Dkt. #22, and Defendants' Request for Judicial
Notice, Dkt. #24. Defendants argue that the Consolidated
Amended Complaint (“CAC”), Dkt. #18, fails to
adequately plead its securities claims. Defendants rely in
part on documents outside the pleadings. In Response,
Plaintiff argues that the CAC is adequate to satisfy the
pleading standards of Rule 12(b)(6), the Private Securities
Litigation Reform Act (“PSLRA”), and Rule 9(b).
Plaintiff also argues that documents not referenced in the
CAC should either not be considered or acknowledged only for
their authenticity. See Dkt. #26. For the reasons
stated below, the Court GRANTS Defendants' Motion to
DISMISS and GRANTS IN PART Defendants' Request for
Judicial Notice. The Court will grant leave for Plaintiff to
file a second consolidated amended complaint.
a putative class action filed on behalf of persons or
entities who purchased or otherwise acquired Seattle
Genetics, Inc.'s common stock between October 27, 2016,
and December 27, 2016, both dates inclusive (the “Class
Period”), seeking to pursue remedies under
§§10(b) and 20(a) of the Securities Exchange Act of
1934 (“Exchange Act”). Lead Plaintiff Carl
Johnson, individually and on behalf of all other persons
similarly situated, bring this action against Seattle
Genetics and the individual defendants Clay B. Siegall, Todd
E. Simpson, and Jonathan Drachman.
Genetics is a development stage biopharmaceutical company
traded on the NASDAQ exchange under the symbol
“SGEN.” Seattle Genetics has a type of cancer
treatment known as an antibody-drug conjugate
(“ADC”) under development, specifically the drug
SGN-CD33A, which uses antibodies to target specific antigens
on the surface of cancerous cells, and deliver locally strong
anticancer agents that would be too toxic to administer
otherwise. Seattle Genetics' trials of SGN-CD33A focused
on developing the drug to treat a type of blood cancer called
Acute Myeloid Leukemia (“AML”).
is the successor to an earlier ADC developed by the
pharmaceutical company Pfizer known as Mylotarg (Gemtuzumab
ozogamicin). Mylotarg was manufactured and marketed by Pfizer
from 2000 to 2010 as a treatment for AML. In June 2010,
Pfizer withdrew Mylotarg from the market at the request of
the FDA because an advanced stage clinical trial demonstrated
that the fatal rate of treatment-related toxicity was
significantly higher than standard chemotherapy with no
corresponding benefit to cancer patients.
alleges that throughout the Class Period, Defendants
repeatedly claimed that SGN-CD33A had a superior design and
more advanced ADC technology than Mylotarg, allowing it to
kill cancerous cells effectively without the toxicity that
doomed the earlier drug. Specifically, throughout the Class
Period, Defendants allegedly claimed SGN-CD33A did not share
the toxic side effects of Mylotarg, and touted the absence of
liver disease in clinical trials, while omitting that
internal information disseminated to Defendants and others
within Seattle Genetics unquestionably demonstrated that
SGN-CD33A caused liver toxicity (hepatotoxicity).
lists several sources of information available to Defendants
indicating that SGN-CD33A posed a high risk of
hepatotoxicity. See CAC at ¶¶ 5, 38-47.
This information in part comes from a confidential witness
working for Seattle Genetics, “CW1.” CW1 has
seventeen years of experience in the biotechnology industry,
and served as the Senior Environmental Health and Safety
Engineer at Seattle Genetics from March 2015 to February
2017. CW1's responsibilities included, e.g.,
coordinating with Seattle Genetics' in-house toxicologist
to prepare Safety Data Sheets that listed specific levels of
toxicity associated with each organ in the human body. The
CAC indicates that CW1 communicated his concerns about the
toxicity of SGN-CD33A to his superiors but not the named
provides several examples of allegedly materially false and
misleading statements made by Defendants to investors
regarding SGN-CD33A. See Id. at ¶¶ 48-57.
Generally speaking, these statements speak positively of
SGN-CD33A's promise as a treatment but omit that
SGN-CD33A had known risks of liver toxicity, and that as a
result, a number of patients exposed to SGN-CD33A in clinical
trials were experiencing serious adverse hepatotoxic events.
December 27, 2016, the FDA placed a full clinical hold on
Seattle Genetics' Phase I/II trial of SGN-CD33A
administered to stem cell transplant patients (“Stem
Cell Phase I/II”). The FDA also placed partial clinical
holds on two other Phase I trials of SGN-CD33A administered
in combination with chemotherapy regimens in AML patients.
Seattle Genetics issued a press release that same day stating
that the trials subject to partial clinical holds would not
enroll new patients, and that existing patients could
continue to participate if they signed a revised consent
form. The press release noted that six patients in the trials
had been identified with hepatotoxicity, with “four
fatal events, ” and that these six patients were out of
more than 300 patients in the clinical trials. CAC at ¶
58. Plaintiff does not plead exactly when these hepatoxic
events occurred, whether before or after the allegedly
misleading statements above, and has stated in briefing that
this information has not been revealed by Defendants.
See Dkt. #25 at 12.
news, Seattle Genetics' stock price declined by $9.50 per
share, or by over 15%, to close at $52.36 on December 27,
2016. That same day, Credit Suisse analyst Kennen McKay
lowered the Company's price target by $10, and remarked
that the announcement was surprising given that Defendants
had created the impression that SGN-CD33A had unique
technology to “avoid the [toxicity] pitfalls” of
Mylotarg. CAC at ¶ 9.
March 6, 2017, the Company announced that it would abandon
the Stem Cell Phase I/II trial and would adopt substantial
risk mitigation measures to address hepatotoxicity in all
other trials of SGN-CD33A. With these hepatotoxicity risk
mitigation measures in place, the FDA lifted the partial
clinical holds it had placed on two other Phase I trials.
January 10, 2017, Plaintiff filed the initial complaint in
this case. Dkt. #1. On April 7, 2017, the Court entered an
Order appointing a lead plaintiff and approving the lead
plaintiff's selection of counsel. Dkt. #8. On June 6,
2017, the lead plaintiff filed the Consolidated Amended
Complaint (“CAC”). Dkt. #18. the CAC alleges
violations of §§10(b) and 20(a) of the Exchange Act
and violation of SEC Rule 10b-5. Plaintiff names certain
individual defendants in addition to Seattle Genetics.
Defendant Siegall is Seattle Genetics' co-founder,
President, Chief Executive Officer and Chairman of the Board
of Directors. Defendant Simpson was Seattle Genetics'
Chief Financial Officer during the relevant period. Defendant
Drachman was Seattle Genetics' Chief Medical Officer and
Executive Vice President, Research and Development during the