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In re Spectrum Pharmaceuticals Inc.

United States District Court, D. Nevada

March 26, 2015

IN RE: SPECTRUM PHARMACEUTICALS INC., SECURITIES LITIGATION

ORDER

LLOYD D. GEORGE, District Judge.

Lead plaintiff Arkansas Teacher Retirement System has filed a Consolidated Amended Class Action Complaint (#103) against defendants Spectrum Pharmaceuticals, Inc., Rajesh C. Shrotriya, Brett L. Scott, and Joseph Kenneth Keller. The defendants move to dismiss the complaint (#108), arguing that it fails to plead the pleading requirements of Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6), and the heightened pleading standards of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b). The plaintiff has opposed the motion (#114). Having considered the arguments of the parties, the pleadings and the papers, the Court will deny the motion.

Motion to Dismiss

A motion to dismiss brought pursuant to Fed.R.Civ.P. 12(b)(6) challenges whether the plaintiff's complaint states "a claim upon which relief can be granted." In ruling upon this motion, the court is governed by the relaxed requirement of Rule 8(a)(2) that the complaint need contain only "a short and plain statement of the claim showing that the pleader is entitled to relief." As summarized by the Supreme Court, a plaintiff must allege sufficient factual matter, accepted as true, "to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Nevertheless, while a complaint "does not need detailed factual allegations, a plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (citations omitted). In deciding whether the factual allegations state a claim, the court accepts those allegations as true, as "Rule 12(b)(6) does not countenance... dismissals based on a judge's disbelief of a complaint's factual allegations." Neitzke v. Williams, 490 U.S. 319, 327 (1989). Further, the court "construe[s] the pleadings in the light most favorable to the nonmoving party." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 900 (9th Cir. 2007).

However, bare, conclusory allegations, including legal allegations couched as factual, are not entitled to be assumed to be true. Twombly, 550 U.S. at 555. "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 679. Thus, this court considers the conclusory statements in a complaint pursuant to their factual context.

To be plausible on its face, a claim must be more than merely possible or conceivable. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not show[n]'-that the pleader is entitled to relief." Id. (citing Fed.R.Civ.P. 8(a)(2)). Rather, the factual allegations must push the claim "across the line from conceivable to plausible." Twombly, 550 U.S. at 570. Thus, allegations that are consistent with a claim, but that are more likely explained by lawful behavior, do not plausibly establish a claim. Id. at 567.

In alleging fraud, a plaintiff must also satisfy the requirements of Rule 9(b), requiring that the plaintiff "must state with particularity the circumstances constituting fraud or mistake." "Rule 9(b) demands that the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct... so that they can defend against the charge and not just deny that they have done anything wrong.'" Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). In short, the plaintiff must plead facts showing "the who, what, when, where and how of the misconduct charged.'" Id., (quoting Vess v. Ciba-Geigy Corp, USA, 317 F.3d 1097, 1106 (9th Cir. 2003)).

Finally, as this matter is also governed by the Reform Act, the plaintiffs must (a) "specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading, " (b) "state with particularity all facts on which [a] belief is formed" regarding the statement or omission, and (c) "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. §78u-4(b).

Background

As both parties are familiar with the Amended Complaint, and as the complaint comprises 93 pages and 219 numbered paragraphs, the Court will endeavor only to provide a very broad summary of the plaintiff's theories and allegations.

"Generic leucovorin" is a drug used in the chemo-therapy treatment of colorectal cancer, and consists of a mixture of equal parts of the levo-isomer and dextro-isomer of leucovorin. Only the levo-isomer of leucovorin is considered pharmocologically active.

Fusilev is, essentially, a purified form of leucovorin consisting solely of the active levo-isomer and is marketed solely by Spectrum. Fusilev costs four times as much as generic leucovorin.

A 1997 study comparing treatments using identical doses (but not equipotent doses) of levo-isomer leucovorin and generic leucovorin in the treatment of colorectal cancer did not identify any statistically significant differences in therapeutic effectiveness or adverse reactions.

In 2008, a shortage of generic leucovorin developed. In April 2011, the FDA approved Fusilev for use in the treatment of colon cancer and Spectrum began marketing Fusilev for the treatment of colon cancer. In the context of the ongoing shortage of generic leucovorin, Fusilev ...


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