United States District Court, W.D. Washington, Seattle
SAMIT PATEL, individually and on behalf of all others similarly situated, Plaintiff,
SEATTLE GENETICS, INC., CLAY B. SIEGALL, TODD E. SIMPSON, and JONATHAN DRACHMAN, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
CONSOLIDATED SECOND AMENDED COMPLAINT AND DENYING REQUEST FOR
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE
matter comes before the Court on Defendants' Motion to
Dismiss Consolidated Second Amended Complaint and
Defendants' Request for Judicial Notice. Dkts. ##34, 36.
Plaintiff filed this putative class action on January 10,
2017. Dkt. #1. After the Court appointed a lead plaintiff and
lead counsel, (Dkt. #8) Plaintiff filed a Consolidated
Amended Complaint (“CAC”). Dkt. #18. The CAC
sought remedies, under §§ 10(b) and 20(a) of the
Securities Exchange Act of 1934, for Plaintiff and all
persons or entities who purchased or otherwise acquired
Seattle Genetics, Inc.'s common stock between October 27,
2016, and December 27, 2016 (the “Class Period”).
Id. On Defendants' motion to dismiss, the Court
found that the CAC did not adequately plead Plaintiff's
securities fraud claims, dismissed the CAC, and granted
Plaintiff leave to file an amended complaint remedying the
deficiencies. Dkt. #30. Plaintiff filed a Consolidated Second
Amended Complaint (“CSAC”) with additional
factual allegations to support his claims. Dkt. #31.
Defendants now seek dismissal of Plaintiff's CSAC,
arguing that Plaintiff failed to cure the deficiencies
identified by the Court and that the CSAC still fails to
adequately state a claim. Dkt. #34. For the reasons stated
herein, the Court grants Defendants' Motion to Dismiss
Consolidated Second Amended Complaint and denies
Defendants' Request for Judicial Notice.
Seattle Genetics, Inc. is a publicly traded biopharmaceutical
company. The “Individual Defendants, ” Clay B.
Siegall, Todd E. Simpson, and Jonathan Drachman, were
executives at Seattle Genetics, Inc. during the relevant
times. Defendants attempted to develop a cancer
treatment known as SGN-CD33A (Vadastuximab Talirine)
(“33A”) which was intended to treat Acute Myeloid
Leukemia (“AML”). 33A, an antibody-drug conjugate
(“ADC”), was intended to bind to cancerous cells
and deliver a toxic payload to kill the cancerous cells. 33A
utilized more potent payloads because it was intended to
target and bind only to cancerous cells.
had successfully used ADC drug technology in an FDA approved
drug (ADCETRIS). But the success of the technology was
otherwise limited, with only one other FDA approved ADC drug.
Among the failures was Defendants' own SGN-33, an
and predecessor to 33A. Defendants abandoned a clinical trial
of SGN-33 in 2010 because the drug failed to extend overall
survival of patients. Defendants also knew that Pfizer had
previously developed and marketed Mylotarg, an ADC, but
withdrew it from the market in 2010 because it was not a
significantly more effective treatment than standard
chemotherapy and resulted in more fatal treatment-related
the Class Period, Defendants represented that 33A was a more
sophisticated drug that would not suffer from the toxic
side-effects that plagued previous ADCs. During the Class
Period, Defendants continued to claim that 33A did not share
the toxic side effects of Mylotarg and touted the promise of
the treatment and the absence of liver disease in clinical
trials. Specifically, Plaintiff alleges Defendants made the
• On October 27, 2016, Defendant Drachman stated that a
clinical study of 33A, in conjunction with a common treatment
course (“7”) that already had high complete
remission rates, was in “a complicated space” but
was “something that we're looking at really
closely. We're excited about our interim data.”
Dkt. #31 at ¶ 81.
• On October 27, 2016, Defendant Siegall stated that
while AML treatment was a competitive business environment
“we're very happy with our positioning in this
field and think that this could make a big difference for
patients. . . . [because 33A] could be very user-friendly
from a combination standpoint” with other treatments.
Id. at ¶ 83.
• On November 8, 2016, Defendant Siegall stated that
clinical trials of 33A combined with hypomethylating agents
(“HMAs”), another common AML treatment, were
encouraging and that Defendants were “excited with the
data, ” the trials had a “low 30 and 60-day
mortality rate, ” and Defendants knew that there was
“a good safety profile.” Id. at ¶
• On December 3, 2016, Defendants issued a press release
announcing partial results from the clinical study of 33A
with 7 treatment and indicated that it “was
well-tolerated with a low early mortality rate” and
showed “a high rate of remissions in younger newly
diagnosed AML patients without significantly adding to the
toxicity of treatment.” Defendants included the most
common adverse events experienced by patients and indicated
that: “No veno-occlusive disease/sinusoidal obstruction
syndrome or significant hepatotoxicity was observed on
treatment.” Id. at ¶ 87.
• On December 5, 2016, Defendants issued a press release
indicating that Defendants were “pleased with the
growing body of data demonstrating that [33A] has a promising
overall tolerability” Id. at ¶ 89. The
press release also presented details of ongoing clinical
• With regard to a clinical study of 33A with HMA
treatment, Defendants represented that the results were
promising with no 30- or 60-day “treatment-related
deaths.” Defendants identified the most common adverse
events experienced by 20% or more of patients and did not
list toxicity issues.
• With regard to a study of 33A monotherapy, Defendants
identified the most common adverse events experienced by 20%
or more of patients and did not list toxicity issues.
alleges that during the Class Period, information known to
Defendants unquestionably demonstrated that 33A was highly
toxic and that patients exposed to 33A were experiencing
serious adverse hepatotoxic events, including death. Despite
this knowledge, Defendants either misrepresented or did not
disclose 33A's hepatotoxicity risks. As a result, lead
Plaintiff Carl Johnson and others acquired Seattle
Genetics' common stock during the Class Period at
artificially inflated prices.
December 27, 2016, Seattle Genetics announced that the FDA
had placed holds on Seattle Genetics' pending clinical
trials. The announcement specified that “[s]ix patients
have been identified with hepatotoxicity, including several
cases of veno-occlusive disease, with four fatal
events.” The abrupt change of course stunned the market
and analysts and stock prices dropped by over 15% on the
news, resulting in Plaintiff suffering damages.
March, 2017, the FDA lifted its holds on some 33A clinical
trials and allowed them to resume with additional risk
mitigation measures in place. However, in June 2017,
Defendants announced they were abandoning several clinical
trials and the FDA ultimately placed a hold suspending all
clinical trials of 33A.
Request for Judicial Notice
have requested that the Court treat ten
documents as incorporated into the CSAC and that the
Court take judicial notice of three documents under Federal
Rule of Evidence 201. Dkt. #36. Plaintiff objects only to the
Court's incorporation of a 2010 press release related to
SGN-33 and to the Court taking judicial notice of
SEC forms showing purchases of stock during the Class Period
by Defendants' independent director. Dkt. #37, at 1-2.
Plaintiff also argues that the Court should only consider the
existence and authenticity of the documents, not the truth of
their contents. Id. at 2-4.
Court finds that it may properly consider the documents
presented by Defendants. United States v. Ritchie,
342 F.3d 903, 908-09 (9th Cir. 2003) (where a complaint
incorporates a document, court can “assume that its
contents are true for purposes of a motion to
dismiss”); Fed R. Evid. 201(b) (court may take judicial
notice of facts not subject to reasonable dispute and where
fact “can be accurately and readily determined from
sources whose accuracy cannot reasonably be
questioned”). However, the Court does not find
consideration of the documents to be necessary to its
decision and therefore denies Defendants' request as moot
on that basis.
making a 12(b)(6) assessment, the court accepts all facts
alleged in the complaint as true, and makes all inferences in
the light most favorable to the non-moving party. Baker
v. Riverside County Office of Educ., 584 F.3d 821, 824
(9th Cir. 2009) (citations omitted). However, the court is
not required to accept as true a “legal conclusion
couched as a factual allegation.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The
complaint must contain sufficient facts “to state a
claim to relief that is plausible on its face.”
Id. at 678. Absent facial plausibility, a
plaintiff's claims must be dismissed.”
Twombly, 550 U.S. at 570.
fraud claims are subject to heightened pleading standards
under Federal Rule of Civil Procedure 9(b) and the Private
Securities Litigation Reform Act (“PSLRA”). To
satisfy Rule 9(b), a claim of fraud must “state with
particularity the circumstances constituting fraud.”
Fed.R.Civ.P. 9(b). To state a claim under the PSLRA,
specifically 15 U.S.C. § 78j(b) and 17 C.F.R. §
240.10b-5, Plaintiff must show: “(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, 552 U.S. 148, 157 (2008). Defendants
argue that Plaintiff has not adequately alleged scienter.
securities fraud context, scienter constitutes “a
mental state embracing intent to deceive, manipulate, or
defraud.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 319 (2007). For a ...