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Disagreeing with methodology isn’t the same as proving statements about an experimental cancer vaccine are false and misleading, a federal district court said in dismissing shareholder claims against Northwest Biotherapeutics Inc. ( Lerner v. Northwest Biotherapeutics , D. Md., No. GJH-15-2532, dismissed 3/31/17 ).
The shareholders cited analyst articles about Northwest Bio’s allegedly false statements, and the Food and Drug Administration’s hold on further DCVax-L clinical trial recruitment, in their class action complaint to the U.S. District Court for the District of Maryland for alleged violations of the Securities Exchange Act. But in dismissing the case, Judge George J. Hazel wrote that the plaintiffs’ complaint didn’t rise above mere disagreements to alleging actionable misrepresentations. The court accordingly granted Northwest Bio’s motion to dismiss.
The court’s decision stops the shareholders’ complaint from proceeding. But it may be cold comfort to Northwest Bio, whose stock dropped from $12 a share in July 2015 to $3 a share by the end of 2015 and was at 22 cents a share on April 5. Online financial publication The Street in an April 5 article said the company, which was known for elaborate presentations at conferences, had a small exhibitor’s table at the American Association for Cancer Research meeting in Washington staffed by its chief technical officer, who couldn’t explain why the study was placed on clinical hold.
Northwest Bio said in a Feb. 6 press release that the FDA had lifted the hold on recruitment of clinical trial participants for the study, and the company reaffirmed this in an April 7 filing with the Securities and Exchange Commission.
Northwest Bio didn’t immediately respond to Bloomberg BNA’s phone request for comment.
The plaintiffs listed 13 statements Northwest Bio made in press releases, conference and investor presentations, and Securities and Exchange Commission filings that they asserted were false and misleading.
In addition to the FDA hold on the DCVax-L clinical trial, the plaintiffs cited accusations from the MD Anderson Cancer Center as quoted in TheStreet that the company had made promotional and unjustified claims about a clinical trial for its experimental cancer vaccine DCVax-Direct; and an article from an independent stock analyst in online financial publication SeekingAlpha that a company hired by Northwest Bio had employed fictitious authors with fake credentials to promote the company.
Hazel’s analysis of the plaintiffs’ allegations concerning Northwest Bio’s statements about initial and ongoing data from its DCVax-Direct clinical trials was typical of his analysis of the other statements. The plaintiffs had alleged that the statements were false and misleading because they hadn’t been substantiated by “trial investigators.” They further argued “the statements omitted that signs of necrosis or tumor death were just as likely caused by needle trauma as a response to the vaccine” and “the statements omitted that the preliminary results actually failed to establish a response as defined by industry-standard RECIST [Response Evaluation Criteria in Solid Tumors] criteria.”
Hazel wrote: “However, Plaintiffs fail to adequately plead how the lack of substantiation by ‘trial investigators’ or ‘fail[ing] to establish a response as defined by industry-standard RECIST criteria’ made Defendants’ statements untrue or amounted to misleading omissions.” He added, “Plaintiffs do not allege that Defendants falsely or inaccurately reported their conclusions; rather they seem to merely disagree with Defendants’ methodology for reaching those conclusions.”
The court also concluded that even if the statements in question had been false or misleading, the plaintiffs hadn’t shown that Northwest Bio representatives knew about the alleged “wrongness” of their actions beforehand. The lack of what the court calls scienter alone is justification for dismissal, Hazel wrote.
The plaintiffs were represented by Cohen Milstein Sellers & Toll PLLC, Washington, and Pomerantz LLP, New York and Chicago, and Northwest Bio by Gibson, Dunn & Crutcher LLP, Washington.
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To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com
The court's decision is at http://src.bna.com/nFf.
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