Berlinger v. BioMarin Pharmaceutical Inc.

Background

BioMarin Pharmaceutical Inc. develops and commercializes therapies for rare diseases and medical conditions. Its officers named in the opinion are Jean-Jacques Bienaimé, Henry J. Fuchs, and Lon Cardon. The company announced the development of BMN 307, an investigational gene therapy for phenylketonuria, at its 2018 research and development event. In 2019, the company stated that its submission to the Food and Drug Administration for BMN 307 was imminent. It later announced that the therapy had been approved for clinical trials and was in the clinical Phase 1/2 stage.

Plaintiffs Local 282 Pension Trust Fund and Local 282 Annuity Trust Fund sued on behalf of themselves and a proposed investor class. They alleged that, between November 14, 2019, and February 23, 2022, defendants made materially false or misleading statements and omitted important information about BMN 307’s development. In particular, plaintiffs alleged that defendants did not disclose until September 5, 2021, that a preclinical mouse study had found liver tumors. They also alleged that the Food and Drug Administration placed a clinical hold on Phase 1/2 testing and that BioMarin’s stock price fell as a result.

The amended complaint asserted two claims: a claim under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, and a claim under Section 20(a) of the Exchange Act against alleged controlling persons.

Court’s Analysis

To state a Section 10(b) and Rule 10b-5 claim, plaintiffs had to allege a material misrepresentation or omission, the required state of mind, a connection to the purchase or sale of a security, reliance, economic loss, and loss causation. Because the claims alleged fraud, the complaint also had to identify the challenged statements and the reasons they were misleading with particularity, and allege particular facts creating a strong inference that defendants had the required state of mind.

The court first held that the amended complaint did not adequately identify the challenged statements. Plaintiffs said that bold and italicized language marked each statement, but the complaint did not explain the significance of that formatting. The emphasis appeared within lengthy quoted passages, and some statements were emphasized in one place but not another. The court concluded that the complaint did not give defendants fair notice of the grounds for the claims.

The court also held that plaintiffs had not adequately pleaded falsity. Plaintiffs relied on defendants’ alleged failure to disclose the liver tumors, but they did not allege when defendants obtained the relevant information. The complaint did not provide facts about when the mouse study began, when dosing ended, when BioMarin received and analyzed the data, when it learned about the tumors, or when that information was communicated to the individual defendants. The court rejected plaintiffs’ reliance on earlier statements about completing preclinical studies because those statements referred to different studies or did not establish when the mouse study was completed. The company’s regulatory filings also stated that some preclinical testing could continue after submission of an investigational new drug application.

The court stated that, without facts establishing the relevant chronology, plaintiffs had not shown that any challenged statement was untrue or misleading when made. Because plaintiffs had failed to state a Section 10(b) and Rule 10b-5 claim, their Section 20(a) claim was also subject to dismissal. The court did not address defendants’ remaining argument concerning scienter in light of its finding that the amended complaint was deficient for the reasons discussed.

Disposition

Judge Maxine M. Chesney granted defendants’ motion to dismiss the amended complaint. The court dismissed the amended complaint with leave to amend and ordered that any second amended complaint be filed no later than February 21, 2023.