APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY, (D.C. Civil Nos. 3-03-cv-01519, 3-03-cv-01691, 3-03-cv-01808, 3-03-cv-01964, 3-03-cv-02149, 3-03-cv-02283) District Judge: The Honorable Anne E. Thompson.
The opinion of the court was delivered by: Barry, Circuit Judge
Argued: November 21, 2008
Before: BARRY, CHAGARES, Circuit Judges, and RESTANI,*fn1 Judge.
In this securities fraud class action, plaintiffs allege that defendants violated §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 by making, with scienter, materially false statements about a clinical study of Celebrex, a popular anti-inflammatory medication. In particular, defendants are alleged to have misled investors by distorting the study's results with the intent to show that Celebrex had a better safety profile than similar medications. Finding the action to be untimely, the District Court granted summary judgment to defendants. This appeal and cross-appeal followed.
Celecoxib, known and marketed commercially as Celebrex, is an anti-inflammatory prescription drug sold by defendant Pharmacia Corporation. Substantially more expensive than many other nonsteroidal anti-inflammatory drugs ("NSAIDs"), Celebrex's promise was rooted in the hope that it would cause fewer gastrointestinal ("GI") side-effects than the less costly NSAIDs.*fn2 To help the hope become a reality, defendants*fn3 commissioned a long-term clinical study of Celebrex's effect on the GI system, the Celecoxib Long-term Arthritis Safety Study ("CLASS study"). This litigation focuses on the aftermath of that study.
According to the complaint, the results of the CLASS study were a disappointment to defendants: Celebrex did not show the desired reduction in GI side-effects as compared to the other drugs studied. Fearing a decrease in sales and stock price, defendants allegedly undertook to distort the results of the study so that it would appear that Celebrex possessed a better GI safety profile than, in fact, it did. Towards this end, in April 2000, defendants released only the results from the first six months of the CLASS study; those results, divorced from the entire set of data, were capable of positive construction.
Defendants released the truncated results of the CLASS study with great fanfare, declaring that the study "shows that Celebrex has a truly exceptional safety profile," and that "the long-term outcome data paints a clear and compelling picture of Celebrex's safety versus NSAIDs." (Joint App. ("JA") 59, 64.) Some documents issued by defendants noted that the CLASS study lasted a full thirteen months, but the reason for excising the last seven months from the analysis was not revealed.
Scientists affiliated with defendants then drafted an article based on the truncated results and submitted it for publication to the Journal of the American Medical Association ("JAMA"). As would become known only later, however, neither defendants nor the article's authors informed JAMA that the data in the article was incomplete. In September 2000, JAMA published the article, which reached the following conclusion: "The overall incidence of GI symptoms experienced by patients taking [Celebrex] was significantly lower than by those taking NSAIDs, as was the rate of withdrawal [from the study] due to GI intolerability." (Id. at 45.)
Defendants hoped to convince the FDA to allow Celebrex to be marketed without the standard GI warning label required for other NSAIDs, and so submitted the complete data from the CLASS study to the FDA in June 2000. FDA staff members, in preparation for hearings on the warning label issue, reviewed the data. On February 6, 2001, the reports of those staff members were published on the FDA's website, alongside defendants' own report. Defendants' report defended the decision to use only the truncated data, asserting that data after the six-month point was biased in favor of the comparator drugs:
The GI safety data presented are for the six-month treatment timepoint based on the analysis of risk factors prespecified in the protocol. In brief, a disproportionate withdrawal of patients at high risk of an ulcer complication from the entire study was observed after six months (depletion of susceptibles). Additionally, a significantly greater withdrawal of patients on diclofenac for GI intolerance occurred during the initial six months of the study. The withdrawal of patients for GI intolerance prematurely removed a group at high risk for ulcer complications and symptomatic ulcers from the diclofenac treatment arm (informative censoring).
The FDA staff reports, stating in part as follows, disagreed with defendants' reliance on the truncated data:
* A rheumatologist's report stated that it was "unclear" that the rationale put forth by defendants "represented a significant bias in assessment of the outcome." (Id. at 631.)
* A gastroenterologist's report stated that defendants' "rationale for analyzing the first 6 months as a meaningful endpoint independent of the success at the study completion is not convincing." (Id. at 472.) However, this report also stated that "[t]he six-month analysis will be reviewed only as a potentially supportive analysis." (Id. at 482.)
* A statistician's report rejected the six-month analysis as "not valid," and asserted that there was "no reason to include information only in the first 6 months." (Id. at 666.)
These reports were prepared to assist the FDA's Arthritis Advisory Committee ("Advisory Committee") in deciding whether to recommend the label change sought by defendants. The day after the publication of the reports, the Advisory Committee held hearings on the issue, and ultimately declined to recommend the label change. The staff reports and the Advisory Committee's recommendation received substantial media attention. The market also took note of the disappointing outcome: between February 6-8, 2001, the price of Pharmacia's stock dropped approximately 9.0%.
After these events, defendants issued a series of positive statements about Celebrex's GI safety profile as well as about the chances for a label change. Defendants claimed, for example, that the CLASS study data presented a "compelling case" for a label change, and that because the CLASS study was "an extremely rigorous and complex ...