Pharmaceutical Company Sufficiently Disclosed Risks Associated With New Drug
Susan M. Greenwood | Bloomberg Law
The U.S. District Court for the District of Massachusetts dismissed plaintiffs’ claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 against AMAG Pharmaceuticals, Inc. (AMAG), certain of its officers and directors, and its underwriters (collectively, Defendants), concerning AMAG’s January 21, 2010 secondary offering of securities (Offering). The Court held that Defendants had no duty to disclose certain information concerning AMAG’s intravenous iron-replacement drug, Feraheme, under Items 303(a)(3)(ii) or 503(c) of Securities and Exchange Commission Regulation S-K.
Plaintiffs alleged that Defendants failed to disclose (1) 23 post-marketing reports of serious adverse events (SAEs) related to Feraheme, (2) that the Food and Drug Administration (FDA) declined to approve Feraheme twice due to safety concerns, and (3) that AMAG allegedly derived its revenue from illegal marketing practices. The Court held that the “mere existence of reports of SAEs is insufficient” to require disclosure under Item 303. Moreover, the Court noted that the SAEs “were consistent with the previously and publicly-disclosed rates [of adverse reactions] observed in the clinical trial” and, thus, “did not constitute a known trend that would have a material unfavorable impact on sales, revenue or income.” Similarly, Defendants’ risk disclosures in the Offering documents, “including data from the clinical trials and how SAEs could impact Feraheme’s success,” met Item 503′s requirement to disclose significant risk factors.
The Court also held that Defendants were not required to disclose AMAG’s failed attempts to win FDA approval of Feraheme or the agency’s Warning Letter on AMAG’s marketing practices. According to the Court, “the FDA’s subsequent approval of [Feraheme] prior to the Offering indicates any concerns raised previously . . . had been resolved.” In addition, the Court said, there was no duty to disclose Feraheme’s failed applications because the FDA already had disclosed publicly the outcome of those applications. Finally, as to the FDA Warning Letter, the Court explained that AMAG received the letter months after the Offering. “[T]he Court ‘may not employ 20/20 hindsight’ but rather must consider whether the omission was material on the date the Offering Documents were issued.” Plaintiffs did not “establish any connection between the Warning Letter or the allegations contained [in the complaint] and the time of the Offering.”
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