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Lerner v. Northwest Biotherapeutics, Inc.

United States District Court, D. Maryland, Southern Division

March 31, 2017

CHAD A. LERNER, Plaintiff,



         This is a securities fraud case arising from Defendants" statements regarding the clinical trials of their cancer treatment products. "DCVax®." Lead Plaintiffs Neil Pastel and Franklin Greer ("Plaintiffs") bring this putative class action against Defendants Northwest Biotherapeutics. Inc. ("NW Bio" or "the Company") and CEO Linda F. Powers ("Powers") (collectively. "Defendants"), for purported violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("the Exchange Act"). 15 U.S.C. §§ 78j(b). 78t, and SFC Rule I Ob -5. 17 C.F.R. § 240, 10b-5. Presently pending before the Court is Defendants" Motion to Dismiss, ECF No. 26. No hearing is necessary. See Loc. R. 105.6. For the following reasons. Defendants' Motion to Dismiss is granted.

         I. BACKGROUND

         Resolving this case on a motion to dismiss, the Court takes Plaintiffs" factual allegations in the Complaint as true.[1] Northwest Biotherapeutics is a developmental-stage biopharmaceutical company traded on the NASDAQ under the symbol "NWBO." ECF No. 22 ¶ 2.[2]Since the Company went public in 2001. N.W. Bio has "focused on developing dendritic cell cancer immunotherapies." Id. Dendritic cell immunotherapies work by using human dendritic cells[3] to activate the body's immune response against cancerous tumors. Plaintiffs are two individuals who purchased common stock in N.W. Bio between January 13, 2014 and August 21, 2015 (the "Class Period"). Id. ¶ 1

         A. The Drug Approval Process

         Under the Federal Food. Drug, and Cosmetic Act (FDCA). persons or "sponsors" seeking to introduce a new drug[4] into interstate commerce must first obtain approval of an application filed with the Food and Drug Administration (FDA), 21 U.S.C. § 355(a). As part of this approval process, the sponsor of the drug submits evidence and "full reports of investigations" to the FDA. §35 5(b)(1). The Commissioner of the Secretary "shall issue an order refusing to approve the application" if "there is a lack of substantial evidence that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the proposed labeling thereof." § 355(d). Under this test, "substantial evidence" is defined as "evidence consisting of adequate and well-controlled investigations, including clinical investigations, by experts qualified by scientific training and experience to evaluate the effectiveness of the drug involved, on the basis of which it could fairly and responsibly be concluded by such experts that the drug will have the effect it purports ..." Id.

         The sponsor, rather than the FDA. is responsible for designing the clinical trials. ECF No. 22 ¶ 24. A sponsor generally conducts clinical trials in three phases. Phase I "includes the initial introduction of an investigational drug into humans" and determines "the metabolism and pharmacologic actions of the drug in humans." 21 C.F.R. § 312.21(a). Phase II involves studies that are "typically well-control led." to determine the effectiveness of the drug on "patients with the disease or condition under study." § 312.21(b). Phase III includes "expanded controlled and uncontrolled trials" intended to "gather additional information about effectiveness and safety" and "evaluate the overall benefit-risk relationship." § 312.21(c).

         B. Summary of Events During the Class Period

         NW Bio's principal products are "DCVax®-L." an immunotherapy primarily for operable glioblastoma brain (and to a lesser extent, ovarian) cancer tumors, and "DCVax®-Direct" a newer immunotherapy for a broad array of inoperable tumors. ECF No. 22 ¶ 3. DCVax-L. N.W. Bio's lead product, began testing in 2005 "as an open label.[5] non-randomized Phase II study without placebo controls." ECF No. 22 ¶ 42. By May 2012, DCVax-E had reached Phase III in clinical trials. Id. ¶ 43. On December 13. 2013. N.W. Bio announced that it had registered 66 "events"[6] with the DCVax-L trial, triggering an interim review by an independent data monitoring committee.[7] Id. ¶ 46; ECF No. 26-6 at 4.[8] The data monitoring committee would first review "safety data." and subsequently review '"efficacy data, " once additional "events" had been registered. See id.: ECF No. 26-6 at 45. On March 7, 2014. N.W. Bio announced that "the Data Safety Monitoring Board (DSMB) has made an unblinded review of the safety data for the Company's ongoing international Phase II GBM trial, and has recommended that the trial continue as planned. The DSMB's review of the efficacy data is still pending.” ECF No. 26-6 at 32.

         In the second half of 2013. N.W. Bio also "began a 60-patient Phase I/II clinical trial with DCVax-Direct." Id. ¶ 49. The DCVax-Direct trial took place at MD Anderson Cancer Center in Houston. Texas, and Orlando Health in Orlando. Florida. Id. On May 15, 2014, N.W. Bio issued a press release entitled "NW Bio Announces First Data From Ongoing DCVax-Direct Trial." FCF No. 26-7 at 2. This press release described "encouraging results" from a "specific case study" involving "a sarcoma patient with a large tumor mass and multiple inoperable metastatic tumors in the lung." Id. The press release reported that this particular patient had received injections of DCVax-Direct. and subsequent MRI scans showed shrinkage of his tumors. N.W. Bio reported additional positive results about DCVax-Direct on June 11. 2014, stating that "3 case studies show no live tumor cells in injected tumors." ECF No. 26-7 at 13.

         In August 2014, N.W. Bio reported an update on the testing of DCVax-L. N.W. Bio stated that "55 patients who were not eligible to enroll in the trial due to unusually rapid tumor recurrence were included in a compassionate use 'Information Arm'[9] and are showing encouraging survival times." On March 27. 2015. the Company reported that these Information Arm patients were demonstrating "promising survival data." ECF No. 26-8 al 2. The Company stated, "[a]s reflected in these data, both Rapid-Progressor Patients and Indeterminate Patients (as well as the Pseudo-Progressor Patient) treated with DCVax-L in the Company's Information Arm are surviving substantially longer than would be expected . . ." Id. Also during this time period. N.W. Bio made several statements about modifications to the primary DCVax-L Phase III trial, including the addition of 36 more patients and increasing the number of events that would be counted in the statistical analysis from 110 to 248. which would strengthen the statistical basis of the trial. ECF No. 26-7 at 18-19.

         C. N.W. Bio's Public Statements

         Plaintiffs allege Defendants made false and misleading representations and omissions in thirteen statements about DCVax[10] over the Class Period (January 13. 2014-August 21. 2015) (the ""Class Period'"). They are, in relevant part, as follows:

         1. N.W. Bio presented a "'Corporate Overview'' at the Biotech Showcase conference. In the presentation. N.W. Bin represented that DCVax had a ">80% response rate" and showed "Median PFS [progression free survival] & OS [overall survival] extended by 1-1/2 years or more beyond results with SOC [standard of care]."' ECF No. 22 ¶ 50.

         2. On March 7. 2014. N.W. Bio issued a press release titled. "NW Bio Receives Recommendation to Continue With Phase III GBM Brain Cancer Trial Based On Data Safety Monitoring Board's Safety Review." which stated that the Data Safety Monitoring Board had made an "unblinded review of the safety data ... and recommended that the trial continue as planned. The DSMB's review of the efficacy data is still pending."" Id. ¶ 51.

         3. On March 28. 2014. N.W. Bio issued a press release addressing its Phase HI trial for DCVax- L. The press release stated:

The Company has created a significant cushion or buffer for achieving this p value of 0.05 by designing its trial to a level of 0.02 rather than designing to the exact 0.05 level. Having this cushion makes the Company's trial design more likely for the trial to succeed. . . . .The Company has consistently reported throughout the trial that it is designed to the 0.02 level.

Id. ¶ 54.

         4. On April 1. 2014. N.W. Bio filed its 2013 annual report on Form 10-K stating:

The interim analysis will be conducted by an independent Data Monitoring Committee, or DMC, with assistance from the independent clinical research organization ... As we also announced the DMC's interim analysis of efficacy data remains outstanding. ... In clinical trials to date, our DCVax treatments have been achieving what we believe to be striking results.

Id. ¶ 56.

         5. On May 15. 2014. N.W. Bio issued a press release announcing anecdotal data from a patient in the DCVax-Direct 1 rial. The press release staled:

Northwest Biotherapeutics ... today provided an initial patient case study, showing signs of tumor necrosis (tumor death) and initial tumor regression . . . "We are excited to see signs of DCVax-Direct mobilizing the immune system to fight the tumors in these patients with advanced metastatic cancer, even while we are still so early in this ongoing trial and while patients are only part way through their treatments." commented Linda F. Powers. CEO of N.W. Bio.

Id. ¶ 59.

         6. On May 27, 2014, N.W. Bio issued a press release claiming a positive initial response in the DCVax-Direct trial. The press release stated:

Northwest Biotherapeutics ... today provided a summary of initial data to date in its ongoing Phase I/II clinical trial of DCVax-Direct for all types of inoperable solid tumors. The Company reported that over 50% of the patients who have completed at least half of the 6 treatments in the trial arc already showing preliminary signs of cancer cell death, tumor shrinkage and/or stabilization . . . [going on to report various results from the trial].

Id. ¶61.

         7. On June 11. 2014. N.W. Bio issued another press release touting preliminary responses to the DCVax-Direct trial. The press release stated:

[I]n the ongoing Phase I/I I clinical trial of DCVax-Direct for all types of inoperable solid tumors, all 9 out of 9 patients who have received 4 of the 6 planned injections are showing tumor cell death, tumor shrinkage, substantial immune cell accumulation in their tumors and/or stabilization . . . "These early glimpses are indicating an increasingly encouraging picture - especially the absence of any live tumor cells in 3 of the patients who have received 4 of the 6 planned injections of DCVax-Direct, " commented Linda Powers. CEO of N.W. Bio.

Id. ¶ 63.

         8. On August 11. 2014. N.W. Bio issued a press release entitled "NW Bio Obtains Approvals for Enhancements of Phase III Trial of DC Vax®-L for GBM Brain Cancer" indicating that it was going to add 36 patients to the Phase III DCVax-L trial for a total of 348. and would more than double the events (disease progression or death) that the trial would measure from 110 to 248. The press release stated:

[NW Bio] announced today that, following a 9-month process of regulatory submissions and reviews by regulators in the US. UK and Germany, it has obtained regulatory approvals to make certain enhancements to its ongoing Phase III clinical trial of DCVax-L Glioblastoma multiforme (GBM) brain cancer. The enhancements will allow the statistical analysis of trial results to take account of a major new variable which has been identified in GBM research .,, By increasing the number of "events" counted, the statistical basis of the trial, which is already quite strong, will be further strengthened.

Id. ¶ 69.

         9. Also on August 11. 2014, N.W. Bio issued a press release announcing an update on the DCVax-L "information arm." The press release stated:

During 2011 and 2012. in addition to conducting the trial, the Company also treated 55 GBM patients with DCVax-L on a compassionate basis in an 'information Arm" outside of the Phase III trial . . . The 55 patients were not eligible for the Phase III trial because they were either definitely or potentially "rapid progressors": patients with such an aggressive form of GBM that their tumor was already re-growing during the 6 weeks of daily radiation . . . "Rapid progressors" have a much shorter life expectancy, in the range of 7 to 10 months, and generally are not expected to respond much to any treatments. ., . According to initial analyses, the median Overall Survival for all 55 patients is 18 months; the median Overall Survival for the 43 patients is a little over 19 months. The Company is in the process of further analyses of the data on these patients.

Id. ¶ 71.

         10. On December 10, 2014. Defendant Powers spoke at the Oppenheimer25th Annual Health Conference. At the conference. Defendant Powers stated:

So our DCVax Phase III trial for brain cancer is our lead program. It underwent a major expansion across the U.S. and in Hurope. We had a safety-only evaluation . . . by the Data Safety Monitoring Committee. Very importantly, in the latter pail of the year we had some regulatory enhancements to the trial, which allow us to add some factors to the statistical analysis at the end of this trial. ..
Also very exciting in September we released information about 55 patients who had not been enrolled in the Phase III trial because they were too sick to meet the eligibility criteria.. . . And that data when we released it. showed that these patients who normally wouldn't be expected to only have survival in the 7 to 10 month range had survival in the 18-19 months range. So the patients who are even too sick to be in the trial really were getting a major benefit from the treatment. That was a very encouraging set of additional data this year.

Id. ¶ 76.

         11. On January 12, 2015, Defendant Powers made a verbal investor presentation at the BioTech Showcase 2015 conference. She stated:

In terms of efficacy, again, we are still in clinical trials, we have to see how the further trials read out, there's no guarantees, but we've seen up "til now has been quite encouraging. These are extensions of the time to disease progression, progression free survival, and extensions of overall survival in the realm of years . . .
We will be sometime this year conducting the first interim analysis for efficacy. That will be conducted by the ...

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