Case 3:21-cv-11613-PS-TJB Document 57 Filed 08/04/22 Page 1 of 46 PageID: 1200
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`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
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`Civil Action No. 3:21-cv-11613
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`
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`ADAM PAXTON, Individually and On
`Behalf of All Others Similarly Situated,
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`Plaintiffs,
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`
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`v.
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`PROVENTION BIO, INC.,
`ASHLEIGH PALMER, and ANDREW
`DRECHSLER,
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`Defendants.
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`
`
`
`OPINION
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`Plaintiffs George L. Jordan, Jr. and Adam Paxton, individually and on behalf of all
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`others similarly situated, filed an amended class action complaint (“CAC”) against
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`Provention Bio, Inc. (the “Company”), its founder and Chief Executive Officer Ashleigh
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`Palmer, and its Chief Financial Officer Andrew Drechsler (collectively, “Defendants”),
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`alleging securities fraud in connection with statements and omissions concerning
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`teplizumab, the Company’s candidate drug for delaying Type One Diabetes (“T1D”).
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`ECF No. 32 (CAC) ¶¶ 1-2, 25, 26. Before the Court is Defendants’ motion to dismiss the
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`CAC pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6), and the Private
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`Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4(b). ECF No. 44. For
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`the reasons below, Defendants’ motion will be granted.
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`1
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`I
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`A1
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`1
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`Teplizumab is a drug intended to delay or prevent the progression of T1D. CAC
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`¶ 58. T1D is an autoimmune disease that generally progresses in three stages—Stage 1,
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`1 Plaintiffs object to the Court considering “nearly two-thirds” of the Exhibits
`Defendants submitted in connection with their motion to dismiss. Pl. Br. at 22 (citing
`Exs. 1-11, 13-17, 29-30, 32-37). Many of those documents (Exs. 1-3, 5-6, 9, 11, 13-15,
`30, 32-34), however, are ones Defendants were required to file with the SEC, see, e.g.,
`Form 8-K, S.E.C., https://www.sec.gov/fast-answers/answersform8k, and to which the
`public has “unqualified access,” Pension Ben. Guar. Corp. v. White Consol. Indus., Inc.,
`998 F.2d 1192, 1197 (3d Cir. 1993). Accordingly, the SEC-filed documents are “matters
`of public record of which the court can take judicial notice,” and the Court does so
`here. Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014); see also In re NAHC, Inc.
`Sec. Litig., 306 F.3d 1314, 1331 (3d Cir. 2002) (affirming a District Court’s noticing
`“documents filed with the SEC, but not relied upon in the Complaint”).
`In addition, one of the exhibits was created by the FDA and the other was
`produced by the FDA during the review process, and both are publicly available on the
`FDA’s website. See Exs. 29, 37. Courts regularly take notice of such documents. See,
`e.g., Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 705 n.5 (3d Cir. 2004); In re Egalet
`Corp. Sec. Litig., 340 F. Supp. 3d 479, 496-97 (E.D. Pa. 2018), aff’d sub nom. Spizzirri
`v. Zyla Life Scis., 802 F. App’x 738 (3d Cir. 2020); see also, e.g., Sierra Club v. United
`States Env’t Prot. Agency, 964 F.3d 882, 893 n.9 (10th Cir. 2020); United States v.
`Garcia, 855 F.3d 615, 621-22 (4th Cir. 2017); Wildman v. Medtronic, Inc., 874 F.3d 862,
`866 n.2 (5th Cir. 2017); Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011); United
`States ex rel. Dan Abrams Co. v. Medtronic, Inc., No. 15-CV-01212, 2018 WL 5266863,
`at *2 n.3 (C.D. Cal. June 7, 2018); In re Zyprexa Prod. Liab. Litig., 549 F. Supp. 2d 496,
`501 (E.D.N.Y. 2008). The Court therefore takes notice of these documents as well.
`As for the objected-to non-SEC-filed press releases and earnings call transcript
`(Exs. 4, 7-8, 10, 16-17, 35), the Court concludes, contrary to Plaintiffs’ contention, Pl. Br.
`at 21-22, that they are integral to the CAC, see Schmidt, 770 F.3d at 249; see also CAC
`Intro. (stating the allegations are “based upon . . . a review of Defendants’ public
`documents, conference calls, and announcements . . .”). They are also from the same
`sources and of the same type as other documents to which Plaintiff do not object, and
`Plaintiffs also do not question their authenticity. Although the Court may consider them,
`see Pension Ben. Guar. Corp., 998 F.2d at 1196-97, it will not because they are
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`2
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`Stage 2, and Stage 3—corresponding to decreasing cell function. CAC ¶¶ 50-52. After
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`the University of Chicago developed teplizumab, MacroGenics, Inc. acquired it in 2005
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`and partnered with Eli Lilly to manufacture the drug in Ireland and conduct clinical trials
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`testing whether teplizumab could delay the progression of T1D in newly diagnosed Stage
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`3 T1D patients (the “Stage 3 clinical trial”). CAC ¶ 56. In 2010, the Stage 3 clinical trial
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`concluded that teplizumab failed to delay the progression of T1D in Stage 3 T1D
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`patients, and MacroGenics halted development of the drug. CAC ¶ 56.
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`The following year, the National Institute of Diabetes and Digestive and Kidney
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`Diseases (“NIDDKD”) and TrialNet spearheaded another clinical trial to test whether
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`teplizumab could delay the progression of T1D in at-risk Stage 2 T1D patients and
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`prevent progression to Stage 3 T1D (the “Stage 2 clinical trial”). CAC ¶¶ 57-60. In June
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`2019, the Stage 2 clinical trial announced positive results, concluding that “a single 14-
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`day course of teplizumab in patients with Stage 2 T1D significantly delayed the median
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`onset of clinical Stage 3 T1D by a minimum of two years compared to the placebo” and
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`“more patients who took teplizumab remained free of clinical Stage 3 T1D beyond five
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`years compared to patients who took the placebo.” CAC ¶¶ 60-61. TrialNet published
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`the results of the Stage 2 clinical trial, which ultimately involved seventy-six participants
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`unnecessary to the resolution of the motion. The Court does not take notice of the
`presentation Defendants filed, Ex. 36, as they have provided no information regarding the
`document’s origins, and it does not appear to be integral to the CAC.
`The Court also takes notice of the documents on which “Plaintiffs take no
`position.” Pl. Br. at 21 (citing Exs. 12, 18-28, and 31). First, many of the documents
`(Exs. 19, 21-22, 24-26, 28) are “public records” or publicly available FDA-created
`documents of which the Court may take notice. Second, these documents are “integral to
`or explicitly relied upon in the complaint.” Schmidt, 770 F.3d at 249.
`3
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`(forty-four of whom were treated with teplizumab and thirty-two of whom were given a
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`placebo), in the New England Journal of Medicine on August 15, 2019. See CAC ¶ 84;
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`Kevan C. Herold, et al., An Anti-CD3 Antibody, Teplizumab, in Relatives at Risk for
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`Type 1 Diabetes, 381 New Eng. J. Med. 603-13 (August 15, 2019),
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`https://www.nejm.org/doi/pdf/10.1056/NEJMoa1902226?articleTools=true.2
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`2
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`In May 2018, while the Stage 2 clinical trial was ongoing, the Company acquired
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`teplizumab from MacroGenics. CAC ¶¶ 2-3, 49. A few months later, the Company
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`contracted with AGC Biologics to manufacture the drug in Seattle, Washington. CAC ¶
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`49. After release of the positive results of the Stage 2 clinic trial, the Company applied
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`for a Breakthrough Therapy Designation for teplizumab, which the U.S. Food and Drug
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`Administration (“FDA”) granted in August 2019. CAC ¶¶ 4, 64. A Breakthrough
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`Therapy Designation expedites the FDA’s review of a drug “and is only given to
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`potential drugs that are intended to treat a serious condition and [where] preliminary
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`clinical evidence indicates that the drug may demonstrate substantial improvement over
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`available therapy on a clinically significant endpoint[].” CAC ¶ 64. The designation also
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`allows a developer to submit a Biologics License Application (“BLA”) on a rolling basis
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`2 The Court takes judicial notice of this publicly available scientific publication
`that is referenced in, and relevant to, the CAC, see CAC ¶ 84, but only for “the
`publication of such information,” not for “the truth of the matter asserted” therein, see
`Abdin v. CBS Broad. Inc., 971 F.3d 57, 60 n.2 (2d Cir. 2020) (“The district court
`properly took judicial notice of the [scientific] publications discussed herein . . . not
`necessarily for the truth of the matter asserted, but for the publication of such
`information[.]”).
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`4
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`and obtain priority review. CAC ¶ 4. If granted, a BLA permits the developer to
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`introduce the drug into interstate commerce. CAC ¶ 33. Generally, a BLA requires the
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`developer to show that its drug is safe to use and safely manufactured. CAC ¶ 36 (citing
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`42 U.S.C. § 262(a)(2)(C)).
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`On April 16, 2020, the Company announced the start of its rolling submission of a
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`BLA for teplizumab. CAC ¶ 65. Because the Company’s BLA relied on the Phase 2
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`clinical trial that used teplizumab manufactured in Ireland, and the Company would be
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`manufacturing its teplizumab in Seattle, the Company had to demonstrate that the two
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`drugs were “biocomparable.” CAC ¶¶ 37, 66. To accomplish this, the Company
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`conducted a bridging study to show that the Ireland-manufactured drug and its Seattle-
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`manufactured drug “ha[d] a similar lasting impact on a patient’s body in both time and
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`effect” (the “Bridging Study”). CAC ¶¶ 67-69. The Bridging Study analyzed
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`pharmacokinetic (“PK”) and pharmacodynamic (“PD”) data. CAC ¶ 67. PK refers to the
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`“activity of drugs in the body over a period of time, including the process by which drugs
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`are absorbed, distributed in the body, localized in the tissues, and excreted” (i.e., time
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`data), CAC ¶ 67, and PD refers to “how the body reacts to a drug” (i.e., effect data), CAC
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`¶ 67. The “traditional” measure of PK is called “area-under-the-curve” (“AUC”). CAC
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`¶¶ 37, 68. In this context, AUC refers to the area underneath a curved line on a graph of
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`data where the y axis is concentration of the drug in the body and the x axis is time—
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`meaning AUC “reflects the actual body exposure to a drug after the administration of a
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`dose” with a higher AUC corresponding to increased concentration of the drug in the
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`body at that particular point in time along the x axis. CAC ¶¶ 37, 68. The Bridging
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`5
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`Study was the first time the Company’s Seattle-manufactured teplizumab was tested on
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`humans. CAC ¶ 72.
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`3
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`In November 2020, the Company completed its rolling BLA submission. CAC
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`¶ 6. The Company issued a press release on November 2, 2020 stating that its
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`submission “represent[ed] a . . . critical step toward the potential first major advancement
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`in T1D therapudics since insulin was introduced a century ago,” and the Company
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`“look[ed] forward to continuing on [its] path toward changing the current treatment
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`paradigm for T1D and, if approved, bringing teplizumab, designated by the FDA as a
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`Breakthrough Therapy, to the U.S. market in 2021.” CAC ¶ 75 (emphasis omitted); Ex.
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`18 at 1-2. The Company’s stock price rose about 18% in the following two days. CAC
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`¶ 77.
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`On November 5, 2020, the Company issued another press release, held an earnings
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`call, and filed a Form 10-Q. The press release stated that the Company was “excited
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`about the progress [its] team has made in recent months as [it] work[ed] to redefine the
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`treatment landscape for T1D,” reiterated that the Company’s “completion of the rolling
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`BLA submission for teplizumab” was a “major milestone,” and stated that the Company
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`was “focused on preparing for a potential product approval and launch in mid-2021.”
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`CAC ¶ 78 (emphasis omitted).
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`On the earnings call, Palmer noted the Company’s “positive manufacturing
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`progress,” recapped the positive results of the Stage 2 clinical trial, and explained that
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`“[t]hroughout the remainder of 2020, [the Company] plan[s] to transition and transform
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`6
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`. . . into a commercialization ready organization in anticipation of the potential launch of
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`teplizumab next year.” CAC ¶¶ 80-81 (emphasis omitted).
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`The Form 10-Q added that “[i]n June 2020, extended follow-up data from the
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`[Stage 2 clinical trial] was announced which showed that a single 14-day course of
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`teplizumab significantly delayed the onset of T1D in [a]t-[r]isk patients by a median of
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`approximately three years compared to the placebo,” and “no additional safety signals
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`ha[d] been noted [and] the results showed that teplizumab’s effect on delaying the onset
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`of clinical T1D was not only consistent from previous analyses, but was durable and now
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`extended to a median of at least three years.” CAC ¶¶ 84-85 (emphasis omitted). The
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`Form 10-Q also noted that the Company may not be able to “successfully start and
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`complete clinical trials and obtain regulatory approval for the marketing of [the
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`Company’s] product candidates.” CAC ¶ 83 (emphasis omitted); Ex. 19 at 3 (emphasis
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`omitted).
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`On November 18, 2020, Palmer spoke at a virtual healthcare conference and
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`stated, “Not only are the results of the [Stage 2 clinical trial] highly statistically
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`significant . . . , they are also highly clinically relevant,” and that the Company
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`“successfully completed the transfer of teplizumab’s prior commercial scale
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`manufacturing process from Eli Lilly’s manufacturing facility in Ireland to [the
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`Company]’s contract manufacturing partner AGC Biologics in Seattle.” CAC ¶ 88-89
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`(emphasis omitted).
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`7
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`On December 10, 2020, an analyst reported that a Company representative stated
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`that the Company “expect[ed] an [FDA] advisory committee [to review its application]
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`. . . and [the Company] would be ready for one if need be.” CAC ¶ 91 (citations omitted).
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`On January 4, 2021, the Company issued another press release announcing that the
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`FDA officially filed the teplizumab BLA, granted the Company’s request for priority
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`review, and scheduled an advisory committee meeting for May 2021. CAC ¶ 92; Ex. 20
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`at 1. The press release also stated that the Company “intend[s] to work closely with the
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`FDA to support their review while also preparing for a potential product launch in the
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`third quarter of 2021.” CAC ¶ 92 (emphasis omitted); Ex. 20 at 1. The Company’s stock
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`price rose 7.79% from December 31, 2020 to January 4, 2021. CAC ¶ 95.
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`At a conference with biotech investors on January 11, 2021, Palmer stated that
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`“we should have an approval decision on or around July 2 of this year[,] [a]nd especially
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`given the extremely convincing nature of the [Stage 2 clinical trial] data, I think we can
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`all agree that the advisory committee meeting should go well.” CAC ¶ 97 (emphasis
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`omitted).
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`4
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`On January 12, 2021, the Company conducted a stock offering of six million
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`shares of common stock. CAC ¶ 98. The offering materials listed the Bridging Study as
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`a “risk factor.” CAC ¶ 98; Ex. 21 at 3. Specifically, the stock offering stated that “[t]he
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`results of our. . . [B]ridging [S]tudy . . . may be unacceptable to the regulatory
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`authorities.” Ex. 21 at 3. The offering materials also stated the following:
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`8
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`We believe, based on the data and our analysis, that the results of the []
`[B]ridging [S]tudy suggest that the drug substances manufactured by AGC
`Biologics and Eli Lilly are comparable. Comparison of drug plasma
`concentration versus time after dosing shows a lower area under the curve,
`or AUC, for the [teplizumab] derived from the drug substance manufactured
`by AGC Biologics. Based on our PK/PD modeling, we do not believe this
`lower AUC is significant enough to impact the efficacy or safety of the to-
`be-commercialized [teplizumab] when used as proposed in our BLA
`filing. . . . The FDA could disagree with our analysis and interpretation of
`the [] [B]ridging [S]tudy, including with respect to the observed lower AUC,
`and, as a result, could require additional analyses and modeling, or additional
`information from ongoing or new studies to support the commercial use of
`the [teplizumab] derived from the drug substance manufactured by AGC
`Biologics.
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`CAC ¶ 98 (emphasis omitted); Ex. 21 at 3. The Company’s stock price dropped 14.34%
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`from January 12 to 13, 2021. CAC ¶ 100.
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`On February 25, 2021, the Company filed its Form 10-K, issued a press release,
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`held an earnings call, and participated in a healthcare conference. The Form 10-K
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`detailed the Company’s view of the Bridging Study results, as well as the FDA’s view.
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`CAC ¶ 101. As for the Company’s view, the Form 10-K stated,
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`We believe, based on the data and our analysis, that the results of the
`[Bridging] [S]tudy suggest that the drug substances manufactured by AGC
`Biologics and Eli Lilly are comparable. Comparison of drug plasma
`concentration versus time after dosing shows a lower AUC, for the
`teplizumab drug product derived from the drug substance manufactured by
`AGC Biologics. Based on our PK/PD modeling, we do not believe this lower
`AUC is significant enough to clinically impact the efficacy or safety of the
`to-be commercialized teplizumab drug product when used as proposed in our
`BLA filing.
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`CAC ¶ 101 (emphasis omitted); Ex. 22 at 4. As for the FDA’s view, the Form 10-K
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`continued,
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`At our February 2021 mid-cycle review meeting with FDA, among other
`matters, we addressed various questions and preliminary concerns raised by
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`9
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`FDA relating to the [Bridging] [S]tudy results and our conclusions, including
`that we believe study results support PD comparability and that our modeling
`supports that the lower PK AUC, which potentially indicates that the drug
`substance manufactured by AGC Biologics may have cleared faster from the
`blood stream than the drug substance manufactured by Eli Lilly, should not
`impact safety or efficacy in a clinically meaningful way. At the meeting,
`FDA indicated that they will be providing us with various additional
`information requests which we plan to address promptly after receipt. The
`FDA stated it could not comment on a resolution to its concerns relating to
`the [Bridging] [S]tudy results at the meeting.
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`CAC ¶ 101 (emphasis omitted); Ex. 22 at 4. The Form 10-K then warned,
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`Ultimately, there is no guarantee that the FDA will agree with our analysis
`and interpretation of the [] [B]ridging [S]tudy, including with respect to the
`observed lower AUC and, as a result, the agency could require additional
`analyses and modeling, or additional information from ongoing or new
`studies to support the commercial use of the teplizumab drug product derived
`from the drug substance manufactured by AGC Biologics. If we are unable
`to satisfy the FDA’s comparability requirements, the timing of the FDA’s
`review and decision on the teplizumab BLA could be delayed, or its
`approvability negatively impacted, including the potential issuance of a
`complete response letter, which would have a material adverse impact on our
`business.
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`CAC ¶ 101 (emphasis omitted); Ex. 22 at 4.
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`The press release reiterated that “[t]he FDA’s filing of our BLA for teplizumab
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`represents a momentous achievement” and that the Company “look[ed] forward to
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`working closely with the FDA to support the Agency’s Priority Review, while []
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`prepar[ing] for a potential commercial launch in the second half of this year.” CAC
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`¶ 109 (emphasis omitted).
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`On the earnings call, Palmer stated that “[t]he momentum we accelerated
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`throughout 2020 continues to be driven forward into 2021,” reiterated the Company’s and
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`FDA’s view of the Bridging Study results, stated that “all of the parameters were within
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`the anticipated target, especially the PD parameters which are more indicative of the
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`efficacy in the safety with the exception of this AUC PK area under the curve” and that
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`“the AGC Biologics’ [metrics] were slightly below the target, indicating that it cleared
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`[the blood stream] a little faster,” and emphasized that the Company “do[es] not believe
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`that the difference in area under the curve will result in a clinically relevant difference in
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`the safety and the efficacy of teplizumab” and “we have confiden[ce] in the interpretation
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`that we have submitted to [the FDA].” CAC ¶ 111-12 (emphasis omitted); Ex. 23 at 4-
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`11.
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`
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`At the healthcare conference, Palmer explained the challenges with replicating the
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`Ireland-manufactured drug, stating,
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`[T]he Lilly drug substance from which the original material was derived used
`in the [Stage 2 clinical trial] was produced a decade ago [and] wasn’t
`validated and is no longer available. We have material that we’ve been able
`to compare the drug product [to] resulting from that process with the material
`that we have produced at AGC Biologics as a result of a technology transfer.
`And from a manufacturing point of view, the material is comparable.
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`CAC ¶ 114 (emphasis omitted). Palmer explained that the Bridging Study used “a single
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`dose in healthy volunteers,” and “there was one Pharmacokinetic component, which we
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`refer to as the area under the curve, which you can essentially assume means [] the rate at
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`which the material clears from the bloodstream, and that component in that particular
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`study missed the target.” CAC ¶ 114 (emphasis omitted). Palmer added that “we believe
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`that the material is comparable and we believe that there are no clinically relevant
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`consequences from that AUC difference[,] nothing with respect to safety[,] and nothing
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`with respect to efficacy and we presented that to the agency,” but the FDA told the
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`Company that “they want to do their own modeling . . . to validate [the Company’s]
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`modeling and [] assumptions.” CAC ¶ 114 (emphasis omitted). The Company’s stock
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`dropped 12.42% from February 24 to 25, 2021. CAC ¶ 117.
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`
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`On March 3, 2021, the Company issued a press release to announce the extended
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`follow-up data from the Stage 2 clinical trial. CAC ¶ 118. Those results showed that
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`“that a single 14-day infusion course of teplizumab [] delayed the onset of clinical disease
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`and insulin dependence in at-risk type 1 diabetes (T1D) patients by approximately three
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`years (median of 32.5 months), adding one year to previously reported results.” CAC
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`¶ 118. The press release added that “[o]utcomes such as these validate [the Company’s]
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`mission to intercept and prevent debilitating and life-threatening diseases” and that the
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`FDA’s response to the BLA was expected to be on July 2, 2021. CAC ¶ 118 (emphasis
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`omitted).
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`At a virtual life sciences conference on March 9, 2021, Drechsler elaborated on
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`more positive results from the extended follow-up data from the Stage 2 clinical trial,
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`noting that “one subject has yet to develop clinical type 1 diabetes more than eight years
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`after their initial receipt of teplizumab” and “[t]hese are remarkable results.” CAC ¶ 120
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`(emphasis omitted). Drechsler added that “[t]here are over 800 patients that have been
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`treated with teplizumab through its development lifecycle, and this represents a solid
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`safety database for us.” CAC ¶ 120 (emphasis omitted).
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`At a healthcare conference on March 16, 2021, Palmer fielded additional questions
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`about the Bridging Study and its results. CAC ¶ 122. Palmer repeated that the Bridging
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`Study involved a “single dose [of the drug] . . . in healthy volunteers,” and “there was one
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`PK parameter, the area under the curve, [that] . . . suggested [the] AGC product might
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`clear [the blood stream] a little faster.” CAC ¶ 122 (emphasis omitted). Palmer added
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`that the Company conducted “extensive modelling” to show that “any differences
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`w[ould] not be clinically relevant when you scale up [the] doses [to] . . . 14 consecutive
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`days.” CAC ¶ 122 (emphasis omitted). Palmer also touted the Company’s relationship
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`with the FDA, stating that “we have a wonderful relationship with the agency,” which has
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`“been incredibly supportive throughout the rolling submission and we have a good open
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`dialog with them and we anticipate a continuing discussion around this.” CAC ¶ 124
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`(emphasis omitted). Palmer added that “certainly [the FDA’s] feedback is likely to come
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`before a decision [along with] more questions or discussion around the modeling,” but
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`the Company does not “anticipate that this would be an [advisory committee] issue
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`because it really doesn’t require input from patients or from clinical experts,” but instead
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`is “really a technical assessment and we are hopeful that when the agency has had a
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`chance to do its modeling and address all of its information requests that they have come
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`to the same conclusion that we have.” CAC ¶ 124 (emphasis omitted).
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`5
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`On April 8, 2021, the Company issued a press release detailing the FDA’s April 2,
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`2021 feedback on the Bridging Study. CAC ¶ 127. Specifically, the press release
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`explained that the FDA “identified deficiencies that preclude[d] discussion of labeling
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`and post-marketing requirements/commitments at this time.” CAC ¶ 127; Ex. 24 at 2.
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`The Company continued that the FDA “indicated that based on the data it ha[d] reviewed
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`to date, the Agency’s position [wa]s that the PK profiles of the two drug products
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`evaluated in the PK/PD [B]ridging [S]tudy were not comparable and that additional data
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`would be required before the FDA’s considerations could be satisfied.” CAC ¶ 127
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`(emphasis omitted); Ex. 24 at 2. The Company’s stock price fell 17.78% from April 8 to
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`April 9, 2021. CAC ¶ 128.
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`
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`On April 27, 2021, the Company issued a press release detailing discussions it had
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`with the FDA on April 23, 2021. CAC ¶ 130; Ex. 25 at 3. The press release explained
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`that the FDA “concluded that the PK profiles of the Eli Lilly-teplizumab and the AGC-
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`teplizumab evaluated in the Bridging Study” were “not comparable, since the intended
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`commercial product did not meet the pre-specified 80-125% PK area under the curve
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`(AUC) comparability target range,” and the FDA could not “be certain if this observation
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`is not clinically relevant.” CAC ¶ 130 (emphasis omitted); Ex. 25 at 3. The press release
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`continued that “the FDA’s PK comparability considerations are likely to result in a delay
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`in potential BLA approval timelines and that the specifics of such delay will depend upon
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`the outcome of ongoing discussions with the FDA to find a solution.” CAC ¶ 130
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`(emphasis omitted); Ex. 25 at 3. The press release added that the FDA suggested “the
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`removal of the term ‘prevention’ from the previously proposed indication, as the
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`remaining term ‘delay’ more accurately reflect[ed] the results of the [Stage 2 clinical
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`trial].” CAC ¶ 131; Ex. 25 at 3.
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`
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`On May 6, 2021, the Company filed a Form 10-Q and held an earnings call where
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`it continued to discuss the results of its Bridging Study. CAC ¶ 133. The Form 10-K
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`stated that the Company’s “rolling BLA submission for teplizumab in the [a]t-risk
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`indication has been initiated and is currently on track to be finalized upon completion of
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`the CMC[3] module by the end of 2020,” but
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`[t]he potential approval of the teplizumab BLA is subject to satisfactorily
`addressing issues raised by the FDA including its conclusion that the drug
`pharmacokinetic profiles of the two drug products evaluated in our []
`[B]ridging [S]tudy for teplizumab are not comparable[,] [which] may require
`further development activities and additional data and will likely affect the
`timing of the review of and decision by the FDA on our BLA submission.
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`CAC ¶¶ 137-38 (emphasis omitted); Ex. 26 at 4, 8.
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`On the call, Palmer explained that the Company “conducted a single low dose []
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`[B]ridging [S]tudy in healthy volunteers and [] observed a PK area under the curve or
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`AUC level below the target comparability range,” which meant that “the new drug
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`product might be clearing from the bloodstream faster than drug product manufactured
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`from the old Lilly drug substance.” CAC ¶ 133 (emphasis omitted); Ex. 26 at 5. Palmer
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`highlighted that “[i]mportantly, . . . we believe that other relevant PK/PD parameters . . .
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`all fell within acceptable ranges of comparability,” CAC ¶ 133 (emphasis omitted); Ex.
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`27 at 5, but explained that the FDA “informed [the Company] that it d[id] not yet
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`consider the two drug products to be sufficiently comparable and cannot be certain
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`[whether] the PKAUC short-haul observed in our single low-dose [] [B]ridging [S]tudy in
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`healthy volunteers [] translate[s] into clinical relevance.” CAC ¶ 133 (emphasis omitted);
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`Ex. 27 at 5. Palmer explained that the results of the Bridging Study “became available at
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`the beginning of the year.” CAC ¶ 135 (emphasis omitted); Ex. 27 at 10-11. Palmer
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`added that “the FDA continues to be very engaged, very helpful and very cooperative and
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`3 “CMC” refers to “chemistry, manufacturing[,] and controls.” CAC ¶ 74.
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`has agreed to work closely with us to figure out our next steps and the path forward to a
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`solution, which we anticipate will likely require our provision of additional data to
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`support PK/PD comparability,” CAC ¶ 133 (emphasis omitted); Ex. 27 at 5, but noted
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`that “there is likely to be a delay based on our understanding of the agency’s position on
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`comparability, [and] we’ve not had discussions on how that delay will manifest itself
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`whether it will be within the current review cycle with some extension or after a formal
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`response,” CAC ¶ 136 (emphasis omitted); Ex. 27 at 14-15. On the call, the Company’s
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`Chief Scientific Officer Francisco Leon also said, “[a]s to why [the Bridging Study
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`results] were below [the AUC] target, the honest answer is, we still don’t know.” CAC ¶
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`134 (emphasis omitted); Ex. 27 at 9. The Company’s stock dropped 6.02% from May 7
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`to May 10, 2021. CAC ¶ 139.
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`6
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`
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`On May 25, 2021, the FDA released briefing documents for the upcoming
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`Advisory Committee meeting. CAC ¶ 142. The briefing “disclosed that the mean AUC”
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`for the Seattle-manufactured teplizumab “was less than half . . . of the AUC” of the
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`Ireland-manufactured teplizumab. CAC ¶ 142 (emphasis omitted). The briefing noted
`
`that the reason for the AUC disparity appeared to be a faster clearance of the Seattle-
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`manufactured teplizumab from the circulation and not any differences in the strengths of
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`the two drugs. CAC ¶ 142.
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`
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`The Advisory Committee held a meeting on May 27, 2021, and the Company
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`presented teplizumab for review. CAC ¶ 144. The Advisory Committee expressed
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`concerns about (1) “the size and scope of the [Stage 2 clinical trial], including the fact
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`that [it] did not meet its enrollment goal and only ended up testing the [drug] on 44
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`patients as opposed to the 71 patients called for by the trial protocol,” and (2) “the fact
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`that the [Stage 2 clinical trial] did not follow patients after their diabetes diagnosis,
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`leaving a gap in knowledge about long term safety of the [Company’s] teplizumab.”
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`CAC ¶ 144 (emphasis omitted). Ultimately, the Advisory Committee voted 10-7 in favor
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`of recommending FDA approval of teplizumab for delay of T1D. CAC ¶ 145. The
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`Company’s stock price fell 28.74% from May 27 to May 28, 2021. CAC ¶ 146.
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`
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`At a healthcare conference on June 3, 2021, Palmer explained the 10-7 vote as
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`“yet another significant step closer to teplizumab potential commercialization, although it
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`is only one consideration FDA will be taking into account when revi