Seattle Genetics Defeats Class Stock Fraud Suit Over Cancer Drug

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Seattle Genetics Inc., a development stage biopharmaceutical concern, Oct. 18 beat back investors’ claims it touted a cancer drug without disclosing the high risk of liver toxicity associated with the product.

By Phyllis Diamond

Seattle Genetics Inc., a development stage biopharmaceutical concern, Oct. 18 beat back investors’ claims it touted a cancer drug without disclosing the high risk of liver toxicity associated with the product.

The investors adequately alleged that SGEN and its top officials made materially misleading statements, the U.S. District Court for the Western District of Washington said, but not that the statements were made with scienter—fraudulent intent ( Patel v. Seattle Genetics Inc. , 2017 BL 373924, W.D. Wash., No. C17-41RSM, 10/18/17 ). Chief Judge Ricardo S. Martinez gave the plaintiffs 30 days to file an amended complaint.

Earlier Drug Withdrawn

The drug, SGN-CD33A, was developed to treat acute myeloid leukemia by using antibodies to target specific antigens on the surface of cancerous cells. SGN-CD33A was the successor to an earlier drug developed by Pfizer Inc. that was withdrawn from the market after a late stage clinical trial showed an unduly high death rate from “treatment-related toxicity.”

According to the complaint, between October and December 2016, the defendants repeatedly claimed SGN-CD33A was able to kill cancer cells without the side effects that toppled the earlier drug. SGEN and its officials touted the absence of liver disease in clinical trials, the investors claimed, without disclosing that internal information “unquestionably demonstrated that SGN-CD33A caused liver toxicity.”

In late 2016, SGEN disclosed that the clinical trials weren’t taking on new patients, and that six patients had been diagnosed with liver disease, four of whom died. The company’s stock price dropped by over 15 percent.

In dismissing the complaint, the court said that even if investors knew about the risk of hepatotoxicity, “the disclosure of an actual death could be viewable by the reasonable investor as having significantly altered the `total mix’ ” of available information.

However, the court said, the investors didn’t allege enough facts to show that the three SGEN executives actually knew about hepatotoxicity in clinical trials or plead a possible motivation for the defendants to make the alleged misstatements.

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com

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