Securities Litigation Arising from Alzheimer's Drug Treatments

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Recently, courts have worked through the fallout of a major and ultimately disappointing development in the treatment of Alzheimer disease (AD). In 2021, the FDA approved Biogen’s Aduhelm (aducanumab) and in 2015, Biogen commenced two Phase III trials of the drug—ENGAGE and EMERGE.

But in 2019, following a planned interim analysis of the aggregated ENGAGE and EMERGE data, the company discontinued both trials on futility grounds. Biogen then performed a post hoc analysis in which it disaggregated the ENGAGE and EMERGE data, which showed that EMERGE met its primary endpoint but ENGAGE did not.

This appeared to be related to the timing of protocol amendments, which had a greater impact on EMERGE than on ENGAGE. The principal effect of the amendments was to increase the dose available to “carriers”—patients who were predisposed both to AD and to one of Aduhelm’s adverse effects. The post hoc analysis appeared to show that at a sufficiently high dose of Aduhelm was effective.

The FDA fully supported Biogen’s post hoc analysis and encouraged the company to submit a new drug application. The FDA scheduled an advisory committee meeting for November 2020, and the FDA and Biogen submitted a joint briefing advocating approval.

Biogen’s stock price rose the day the briefing document was released. The stock fell the next trading day, possibly in delayed response to a dissenting section of the document written by an FDA statistician.

The advisory committee did not vote in November 2020 for approval. Nevertheless, the FDA approved Aduhelm under its Accelerated Approval pathway. The approval was controversial, and Aduhelm’s subsequent launch was not a success. A contract with the US Department of Veterans Affairs (VA) fell through.

The launch sites Biogen had targeted were slow to work through pharmacy and therapeutics committee reviews. Medicare decided to cover the drug only in the clinical trial setting. Biogen cut the price of the drug in half and then in 2022, the company largely abandoned commercialization.

This saga generated two major pieces of securities litigation—one arising from statements the company made before the November 2020 advisory committee meeting and the other from statements about the launch. Biogen prevailed in the district court in the first action.

But in 2023, the appellate court reversed in part. Shash v. Biogen, Inc., 84 F.4th 1 (1st Cir. 2023). In the second case, concerning the launch, Biogen had prevailed in the district court, but, unusually, the district court allowed plaintiffs to amend post-judgment, reviving the case in March 2024. Oklahoma Firefights Pension and Ret. Sys. v. Biogen, Inc., 2024 WL 3178638 (D. Mass. Mar. 19, 2024).  

In the appellate decision, the court reversed as to only one challenged statement: “[C]onsistent with the findings from ENGAGE and EMERGE, you really need to get to the higher dose. And I think our data are all consistent with that.”

Rather than applying the Supreme Court’s multi-pronged analysis for opinion statements, the appellate court focused on a comment in the controlling decision—that reasonable investors will conclude that an opinion “fairly aligns with the information in the issuer’s possession at the time.”

With that as a standard, the appellate court concluded that plaintiffs had adequately alleged falsity. The challenged statement, the court observed, did not align with all data. While some of the post hoc subgroup analyses showed that a higher dose was more effective, others did not.

The appellate court did not discuss other concepts in controlling Supreme Court law—that defendants who make opinion statements need not disclose every “fact cutting the other way,” and that reasonable investors do not expect that “every fact known to an issuer supports its opinion statement.”

Applying those principles might have changed the legal analysis. The subgroup data that did not support the challenged opinion—“I think our data are all consistent with that”—could be characterized as simply facts cutting the other way.

On the other hand, the company’s use of the word “all” may have locked in the outcome. The statement “I think our data are all consistent with that” appears to signal that no facts cut the other way. A slightly different formulation—“I think our data are consistent with that,” or even “I think our data overall are consistent with that”—may have led to a different outcome.

Biogen initially fared better in the launch case. Plaintiffs there challenged statements about the readiness of sites to begin prescribing, about Medicare coverage, about the VA contract, and about Biogen’s collaboration with the FDA leading up to approval. The court carefully parsed the challenged statements and concluded that there was no inconsistency between those statements and the truths that the plaintiffs alleged the company had concealed.

Post-judgment, however, plaintiffs moved for leave to amend the complaint based on purportedly new evidence derived from a Congressional committee report. The court held that the report showed management discussing a high likelihood of a longer process and narrower coverage for Aduhelm than in the company’s public statements about Medicare approval, supporting an inference of knowing falsehood. While the court denied the motion to amend the judgment as to other categories of statements, the survival of the challenge to statements as to Medicare coverage allowed the case to move forward.

A third recent decision arising from a failed AD treatment is In re Cassava Sciences Inc. Securities Litigation, 2023 WL 3442087 (W.D. Tex. May 11, 2023). Biogen and Cassava exist on opposite ends of the life sciences company spectrum. Biogen has thousands of employees and $10 billion in annual revenue.

Cassava has a small number of employees and has never had a product approved. But like Biogen, Cassava had an AD drug with an unusual trajectory, in which initially unfavorable results improved on reexamination. And like Biogen, Cassava became enmeshed in securities litigation arising, in part, from that unusual fact pattern and was unable to dispose of it at the pleading stage.

Cassava announced in May 2020 that a Phase IIb study of its AD simufilam failed to meet its primary endpoint. But in reporting complete results in September 2020, the company said that a reanalysis by an “outside lab” had yielded a different outcome, in which simufilam “significantly improved an entire panel of validated biomarkers” for AD.

After the company made additional public presentations and published journal articles, skeptics emerged. Two physicians who held short positions in Cassava’s stock filed a Citizens Petition with the FDA, suggesting that the company had manipulated data.

The “outside lab” that performed the re-analysis turned out to have been run by the co-inventor of simufilam, who was a Cassava consultant and sat on the company’s scientific advisory board. An expert on data manipulation stated in an online post that images Cassava used in its presentations were not originals.

The New York Times published an article in which experts said they did not trust Cassava’s methods or results. Reuters reported a DOJ criminal investigation into the matter. Subsequently, Cassava’s stock declined through these developments.

Given the wealth of detailed criticism in the public forum, plaintiffs were able to plead with sufficient particularity that the company’s positive statements about trial results were misleading by virtue of omitted information. The court also drew on the widespread nature of the attack on Cassava’s data in evaluating scienter.

The search for an AD treatment, perhaps because of the tremendously high stakes involved, has spawned some unusual and dramatic narratives. Recent decisions show how the plaintiffs’ bar has been able to capitalize on them.

About the Authors

Robin E. Wechkin is Counsel with Sidley Austin LLP in Seattle. She can be reached at rwechkin@sidley.com.

Sara B. Brody is a partner with Sidley in San Francisco. She is co-leader of the firm’s Securities and Shareholder Litigation practice group and heads the Northern California litigation practice. She can be reached at sbrody@sidley.com.

Sarah Hemmendinger is a partner with Sidley in San Francisco. She can be reached at shemmendinger@sidley.com.