Judge John Michael Vazquez of the District of New Jersey partly granted and partly denied Celgene Corporation’s motion to dismiss a complaint that alleged that the company engaged in securities fraud through making certain public statements concerning Celgene products.
The plaintiffs in the original complaint, Schwab Capital Trust and its affiliates, filed their action independently of a class action also pending in the District of New Jersey, In re Celgene Corporation Securities Litigation, that brought the same allegations against Celgene and several company officials and employees.
The plaintiffs claimed that Celgene made material representations and omissions about psoriatic arthritis and psoriasis drug Otezla and ulcerative colitis and multiple sclerosis drug Ozanimod, “which Celgene touted as products to lessen the anticipated revenue drop following the Revlimid patent expiration,” the court explained.
Specifically, Celgene represented that “Otezla net product sales would grow to between $1.5 billion and $2 billion in 2017” and that it “projected annual Ozanimod sales of up to $6 billion,” according to the complaint.
However, the resulting Otezla numbers proved “dismal,” and the company eventually “stunned the market by announcing that, in light of the dismal Otezla sales numbers, the Company had slashed the 2017 guidance by more than $250 million,” the complaint said, with a subsequent stock decline of more than 16%. On the Ozanimod front, the Food and Drug Administration sent a refuse to file letter after Celgene filed its new drug application for Ozanimod, and after disclosing that, Celgene’s stock fell from $95.78 to $87.10 per share.
The defendants moved to dismiss, arguing that the complaint failed to state a claim and failed to sufficiently plead violations of the Private Securities Litigation Reform Act of 1995 (PSLRA), largely relying on the fact that the referenced class action was partially dismissed for that reason, the court explained. Accordingly, the court issued a similar opinion with the same outcome.
The court sided with the defendants on most of Celgene’s statements, finding that some of the Celgene officials’ statements simply constituted “puffery” or otherwise were protected by the safe harbor under the PSLRA. One statement that the court found to be actionable, and thus not dismissable, was a Celgene official’s response to an Otezla pricing question: “We believe that we should increase price and we’ve got the value and the data to support increasing utilization, and (an) increasing value.” The court said that the plaintiffs sufficiently alleged that this response was an opinion, and thus actionable under the PSLRA.