The opinion of the court was delivered by: Chesler, District Judge
This matter comes before the Court upon two motions to dismiss the Corrected Consolidated and Fourth Amended Class Action Complaint ("Complaint") covering all Defendants in this case. The matter was opened by the motion to dismiss brought by Defendants Merck & Co., Inc., Raymond V. Gilmartin, Kenneth C. Frazier, Richard C. Henriques, Jr., Peter S. Kim, Judy C. Lewent, Alise S. Reicin, Lawrence A. Bossidy, William G. Bowen, Johnetta B. Cole, William B. Harrison, Jr., William N. Kelley, Heidi G. Miller, Thomas E. Shenk, Anne M. Tatlock, Samuel O. Thier, David Anstice, Richard T. Clark, Celia Colbert, Linda M. Distlerath, Caroline Dorsa, Bernard J. Kelley, Per G. H. Lofberg, Per Wold-Olsen and Lloyd C. Elam (hereinafter, these Defendants will be referred to collectively as "Merck") (docket item # 14). Defendant Dr. Edward M. Scolnick separately filed a motion to dismiss (docket item # 13). Upon being served, Defendant Niall Fitzgerald joined in Merck's motion to dismiss (docket item #162) and therefore, will hereinafter be encompassed within the Court's collective reference to various defendants as "Merck." The motions seek dismissal on numerous grounds, including the running of the statutes of limitation. For the reasons that follow, the Court grants the motions and dismisses the Complaint as time-barred. Because the Court has determined that Plaintiffs' claims are untimely, the Court will not address the other arguments raised by Defendants in the motions to dismiss.
This securities fraud class action concerns alleged misrepresentations and omissions made by Defendants about the safety profile of Merck's prescription drug VIOXX. Plaintiffs allege that Merck and Dr. Scolnick*fn1 concealed information that suggested or demonstrated that VIOXX significantly increased the risk of heart attack or other cardiovascular event and made misleading statements about the drug's safety. Plaintiffs, who purchased Merck securities during the time period from May 21, 1999 through October 29, 2004, allege that they bought the securities at prices that were artificially inflated due to Defendants' fraud. The earliest securities fraud complaint was filed on November 6, 2003.
A. VIOXX Research and Safety Concerns
VIOXX, generically known as rofecoxib, is a nonsteroidal anti-inflammatory drug ("NSAID"). It was introduced to the market on May 21, 1999. In May 2001, the Federal Food and Drug Administration ("FDA") approved VIOXX for treating primary dysmenorrheal (severe menstrual cramps), managing acute pain in adults, and relieving symptoms relating to osteoarthritis. Merck promoted VIOXX as having a safety profile superior to other NSAIDs. Specifically, unlike traditional NSAIDs, which include aspirin, ibuprofen and naproxen, VIOXX did not cause serious gastrointestinal side effects. Whereas traditional NSAIDs operate by inhibiting two enzymes - cyclooxygenase-1 ("COX-1") and cyclooxygenase-2 ("COX-2") VIOXX selectively suppresses only COX-2 without affecting COX-1. This is significant because the suppression of COX-1 can lead to the deterioration of the stomach lining and gastrointestinal problems such as perforations and bleeds.
Merck continued to research, study and test VIOXX after its approval by the FDA and introduction to the market. One of these studies was Study 088, which the Court highlights because of its relevance to the facts on which the Court bases its decision on the motions to dismiss. In January 1999, Merck commenced Study 088, known as the VIOXX GI Outcomes Research ("VIGOR") study, to continue to examine VIOXX's gastrointestinal safety profile. Participants received either a daily dose of VIOXX at 50mg a day (twice the maximum recommended and approved chronic dose) or naproxen at 1000mg a day (a standard dose). Upon completion of the VIGOR study in March 2000, Merck made a public disclosure about the study in a March 27, 2000 press release. Among other things, the VIGOR study showed that thrombotic events, including myocardial infarction (heart attack), occurred in more patients in the VIOXX treatment group than in the naproxen treatment group. In relevant part, the March 27, 2000 press release stated that
significantly fewer thromboembolic events were observed in patients taking naproxen in this GI outcomes study, which is consistent with naproxen's ability to block platelet aggregation. This effect on these events had not been observed previously in any clinical studies for naproxen.
(Baron Decl., Ex. 5.) In other words, Merck took the position that the difference in thrombotic event rates between VIOXX and naproxen was due to a cardioprotective effect of naproxen (also known as the "naproxen hypothesis"). Significantly, according to the allegations made by Plaintiffs, Merck was aware that there was another explanation for the difference in thrombotic event rates in the VIGOR study's treatment groups, that is, that VIOXX had pro-thrombotic properties, or, in other words, that VIOXX increased the risk of a thrombotic event such as a heart attack.
On June 29, 2000, Merck submitted VIGOR data and analysis to the FDA. On February 8, 2001 the FDA's Arthritis Advisory Committee held a public hearing to discuss VIOXX's gastrointestinal and cardiovascular safety. Merck presented the naproxen hypothesis as the best explanation for the VIGOR results. The Committee found that VIGOR did not conclusively establish a link between VIOXX and cardiovascular risk. It also concluded, however, that Merck should include on the VIOXX label data about the higher incidence of cardiovascular events observed in the VIGOR study. A consultant to the Arthritis Advisory Committee on this issue and a member of the Cardiovascular and Renal Drugs Advisory Committee, Dr. Steven Nissen, stated:
Briefly, I think what I would say in the label is that there was an excess of cardiovascular events in comparison to naproxen, that it remains uncertain whether this was due to beneficial cardioprotective effects of naproxen or prothrombotic effects of the agent, and leave it at that, that basically we don't know the reason.
We do know that there was a difference. That awareness should be made available to the prescriber and to the consumer, but without necessarily a final judgment as to the reasons for that difference.
(Id., Ex. 10, at 210:5-14.)
The VIGOR study initiated a public debate about the naproxen hypothesis versus the hypothesis that VIOXX increased cardiovascular risks. The issue received extensive coverage from the press, scientific publications, and financial analysts. In a November 23, 2000 article authored by both Merck and non-Merck scientists, the New England Journal of Medicine published the results of the VIGOR study; the article attributed the higher incidence of thrombotic events in VIOXX patients relative to naproxen patients to the purported cardioprotective effect of naproxen without raising the alternate explanation of increased risk due to VIOXX. (Id., Ex. 6.) Many financial analyst reports and articles published in scientific and medical literature as well as general news publications questioned Merck's interpretation of the VIGOR data. An April 27, 2000 report by Reuters cast doubt on "Merck's suggestion that naproxen conferred protection against heart attacks and strokes" and quoted Roche Holding, Ltd., a manufacturer of naproxen, as stating: "To our knowledge, naproxen does not prevent heart attack or stroke." (Id., Ex. 89). Following the February 8, 2001 FDA hearing, a February 9, 2001 article in USA Today stated that "[arthritis patients] should know that the blockbuster drug [VIOXX] might increase their risk of suffering a heart attack." (Id., Ex. 105.) On May 2, 2001, The New York Times also reported on the higher risk of heart attack for patients taking VIOXX. (Id., Ex. 106).
An article published in the August 22, 2001 Journal of the American Medical Association ("JAMA") reported results of a study of VIOXX and Celebrex conducted by the Cleveland Clinic. It stated: "Current data suggest that the use of selective COX-2 inhibitors might lead to increased cardiovascular events." (Id., Ex. 3, at 958.) The article's authors argued that the data raised a "cautionary flag" about the risk of cardiovascular events with selective COX-2 inhibitors, such as VIOXX. (Id. at 954.) With regard to the VIGOR study, the article commented that "[t]he results of the VIGOR study can be explained by either a significant prothrombotic effect from rofecoxib or an antithrombotic effect from naproxen (or conceivably both)." (Id. at 957.) The JAMA article received extensive coverage in other publications, including mainstream news sources.
On the other hand, other news and analyst reports during the same 2000 to 2001 time period reinforced the naproxen hypothesis as the correct interpretation of the VIGOR data or minimized the concern raised about VIOXX's possible pro-thrombotic properties. Examples of such information include the following:
* April 12, 2000 Biotech Week article entitled "Merck & Co., Inc.: Preliminary Results of Gastrointestinal Outcomes Study Presented"
"Vioxx, like all COX-2 selective medicines, does not block platelet aggregation and would not be expected to have similar effects. Medicines like aspirin and naproxen that significantly inhibit COX-1 block platelet aggregation and therefore have the potential to provide cardioprotection."
* April 28, 2000 Dow Jones article
"[A]t least one analyst - and the company - said there's little to worry about. 'This whole thing has been overblown and taken out of context,' says Wall Street Journal All-Star analyst Jeff Chaffkin of PaineWebber. 'We had this data over four weeks ago. This is nothing new.'"
* May 1, 2000 Bernstein Research analyst report "We'd be shocked if [the] FDA gave this a second glance, much less re-labeled VIOXX to suggest greater risks of vascular events. It's not VIOXX increasing events, it's Naproxen reducing them."
* February 8, 2001 Bloomberg News article entitled "Merck Drug Should Note Heart Risk, Stomach Benefit, Panel Says"
"Differences in cardiac risk between Vioxx and naproxen appeared to result from a beneficial effect of naproxen, not a danger from Vioxx, said Nigel Harris, the [FDA Arthritis Advisory Committee] panel's chairman and the dean of the department of internal medicine at Morehouse School of Medicine."
* August 22, 2001 Credit Suisse First Boston analyst report
"The JAMA researchers themselves point out several significant limitations in their study . . . We note that the VIGOR trial did not include low-dose aspirin, and that the control drug (naproxen) is known to possess a cardio-protective, anti-platelet effect. This makes it extremely difficult to determine whether the difference in cardiac events seen in VIGOR results from a naproxen 'benefit' or a Vioxx 'liability.'"
Merck did not remain silent in this public debate, and Plaintiffs highlight the consistent assurances Merck offered about the safety of its VIOXX product. All the while that certain media and financial analyst reports raised concern about whether VIOXX in fact increased the risk of heart attack, Merck disseminated positive information about the product, promoting its overall safety. In general, the statements attributed VIGOR data solely to the cardioprotectiveness of naproxen and/or discredited questions raised about the possibility that VIOXX is prothrombotic. Numerous press releases issued by Merck stated that VIOXX had an "excellent safety profile" and a "favorable cardiovascular safety profile." (Compl., ¶¶ 143, 190, 202-04.) In a June 13, 2001 press release announcing the findings of an analysis combining data from 19 clinical studies, defendant Reicin, the Executive Director of Clinical Research at Merck, was quoted as stating that "results in the meta-analysis with VIOXX v. naproxen are consistent with the ability of naproxen to block platelet aggregation, and, therefore, to act as an anti-platelet agent" -- in other words, endorsing the naproxen hypothesis without disclosing that this explanation had not been confirmed and that the results may possibly be due to a prothrombotic effect of VIOXX. (Id., ¶ 206.) In anticipation of the August 22, 2001 article in JAMA, Merck commented that "we already have additional data beyond what they cite, and the findings are very, very reassuring. VIOXX does not result in any increase in cardiovascular events compared to placebo." (Id., ¶ 214).
B. The FDA Warning Letter
The FDA also entered, and fueled, the public discussion. On September 17, 2001, the FDA issued a Warning Letter to Merck concerning Merck's promotion of VIOXX. The letter admonished Merck for misrepresenting the safety profile of VIOXX, downplaying the cardiovascular findings of the VIGOR study, and explaining the results by offering the naproxen hypothesis as if it were based in fact. The letter stated:
You have engaged in a promotional campaign for Vioxx that minimizes the potentially serious cardiovascular findings that were observed in the Vioxx Gastrointestinal Outcomes Research (VIGOR) study, and thus, misrepresents the safety profile for Vioxx. Specifically, your promotional campaign discounts the fact that in the VIGOR study, patients on Vioxx were observed to have a four to five fold increase in myocardial infarctions (MIs) compared to patients on the comparator non-steroidal anti-inflammatory drug (NSAID), Naprosyn (naproxen).
Although the exact reason for the increase rate of MIs observed in the Vioxx treatment group is unknown, your promotional campaign selectively presents the following hypothetical explanation for the observed increase in MIs. You assert that Vioxx does not increase the risk of MIs and that the VIGOR finding is consistent with naproxen's ability to block platelet aggregation like aspirin. That is a possible explanation, but you fail to disclose that your explanation is hypothetical, has not been ...