b'Hou Liu v. Intercept Pharmaceuticals, Inc.,of serious adverse events (SAEs) that occurred over Case No. 17-cv-7371 (LAK), 2020a one-year period in 27 users of Ocaliva, out of ap-WL 1489831 (S.D.N.Y. Mar. 26, 2020)proximately 3,000 total users. On September 12, 2017, Statements Concerning Drugs SafetyIntercept issued a Dear Healthcare Provider Letter (the HCP Letter), which warned providers against pre-and Tolerability scribing Ocaliva to late-stage PBC patients with a dose Intercept Pharmaceuticals, Inc. (Intercept) is a bio-higher than recommended. Following the issuance of pharmaceutical company focused on the developmentthe HCP Letter, Intercepts common stock fell approx-of novel drugs to treat chronic liver diseases. Interceptimately 20%, from a close of $113.48 on September developed a drug called Ocaliva for treatment of11, 2017 to a close of $90.75 on September 13. On patients with primary biliary cholangitis (PBC), a rareSeptember 21, 2017, FDA issued a drug safety commu-liver disease that, if untreated, can cause cirrhosis, livernication and a corresponding safety alert regarding the failure, or death. PBC is classified as either early-stageOcaliva SAEs, which warned that Ocaliva was being PBC, in which patients have mild liver failure, or late- incorrectly dosed in some late-stage PBC patients, stage PBC, in which patients have moderate or severeresulting in an increased risk of serious liver harm and liver failure. In May 2016, after Intercept completed adeath. Intercepts common stock price fell againthis Phase 3 clinical trial consisting of 1,325 participants,time with a two-day decline of approximately 37.2%, most of whom had early-stage PBC, FDA approvedfrom $98.12 per share on September 20, 2017 to $61.59 Ocaliva under its Accelerated Approval Program (theper share on September 22.AAP). Recognizing that the livers of patients with late- On September 27, 2017, investors filed a putative class stage PBC are more compromised, and therefore moreaction complaint, asserting claims for violations of the vulnerable to drug toxicity, FDA recommended thatSection 10(b) and 20(a) of the 1934 Act and Rule 10b-5 late-stage patients take lower doses of Ocaliva thanpromulgated thereunder against Intercept and several patients with early stages of the disease. These recom- of its executives. Plaintiffs allegations focused on the mendations were included on the FDA-approved label30 reports of SAEs as well as the HCP Letter, specif-for Ocaliva. Furthermore, given the patient profile in theically alleging that Intercepts statements concerning Phase 3 clinical trial, FDA was unable to assess theOcalivas safety and patients tolerance of the drug safety and tolerance of Ocaliva in late-stage patients,were misleading because Intercept allegedly failed to and therefore instructed Intercept to monitor patientsdisclose that SAEs had been reported. Plaintiffs also with late-stage PBC and conduct a Phase 4 clinical trial,alleged that Intercepts statements regarding dosage which is required for all drugs approved under the AAP. compliance (i.e., the extent to which a patient complies After Ocalivas approval, Intercept created an enroll- with the prescribed interval and dose of a drug regi-ment form to aid health care professionals in prescrib- men) were misleading because they allegedly omitted ing Ocaliva, which provided only two dosage options,that some patients were prescribed incorrect doses of neither of which reflected the suggested lower doseOcaliva, allegedly due to the enrollment forms limited for patients with late-stage PBC. Between June 24,dosage options. Defendants moved to dismiss the com-2016 and June 30, 2017, Intercept received 30 reportsplaint, and the court granted the motion in full.The court first rejected plaintiffs allegations that Intercepts alleged omission of the reported SAEs The court noted that the mere existencerendered its statements about Ocalivas safety and tolerability false or misleading, concluding that plaintiffs of SAEs was not sufficient to establishfailed to establish the materiality of the SAEs and thus materiality; something more wasfailed to adequately allege that a reasonable investor would have viewed the SAEs as significantly altering needed to link the SAEs to Ocaliva, suchthe total mix of information available. The court noted as statistically significant evidence ofthat the mere existence of SAEs was not sufficient to establish materiality; something more was needed to causation. The court concluded that thelink the SAEs to Ocaliva, such as statistically significant allegation that 27 out of 3,000 Ocaliva usersevidence of causation. The court concluded that the allegation that 27 out of 3,000 Ocaliva users experi-experienced an SAE during a one-yearenced an SAE during a one-year period, without more, period, without more, was not enough towas not enough to allege materiality. The court also dis-missed claims based on defendants statements about allege materiality. dosing compliance. The court reasoned that even though Intercepts enrollment form allegedly provided only two dosage options, neither of which reflected the 31'