Ninth Circuit Hears Claims on Obesity Drug

     SAN FRANCISCO (CN) – Whether officials for Vivus concealed the potential for delays in approval of the obesity drug Qnexa was the focal point of arguments before the 9th Circuit Friday in a class action securities fraud complaint.
     Judges Richard Clifton, Lynn Adelman and John Noonan Jr. heard the case in which Vivus and co-defendants Leland F. Wilson and Dr. Wesley W. Day prevailed in district court. Lead plaintiff Merle Kovtun filed the lawsuit in November 2010.
     The essence of the claim is that Vivus and two of its officers “downplayed and failed to disclose known material risks that would affect the likelihood and timing of FDA approval and commercialization of Vivus’s new drug, Qnexa,” Richard Weiss of the Brower Piven law firm argued.
     “This case is not about whether defendants accurately predicted the safety of Qnexa or whether it would ultimately be approved by the FDA,” Weiss said. “The case starts with their announcement of results from two year-long, phase-three trials.
     “The district court fundamentally erred in holding that there was no falsity here,” Weiss said. “The FDA advisory panel, which voted against approving Qnexa, agreed, based on its review of all its clinical data Vivus had submitted, that increased heart rate was a significant concern and called for more study of cardiovascular issues.”
     Judge Clifton pointed out the FDA ultimately approved the drug after a two-year delay.
     “It really does make that first decision one much more of: ‘No, there’s not a problem with it, but given the history of the ingredients, we want a little more time,'” Clifton said.
     Weiss said Vivus was “unduly positive about the safety” of Qnexa when releasing its initial report.
     Clifton said the plaintiffs’ case isn’t that Vivus predicted that the FDA would approve the drug but that the company knew there would likely be a delay in approval, which came two years later.
     Weiss replied that one issue was the “commercial prospects” for Qnexa, which was delayed for two years at a time when Vivus was struggling financially, resulting in “two years of lost revenues.”
     He suggested that Vivus was desperate to get Qnexa on the market to shore up its finances and that it misrepresented the effectiveness of the obesity drug by claiming an average 15 percent reduction in people’s weight and improvements in cardiovascular health during clinical trials.
     “We’re talking about a two-year delay for a company that only had one drug out at the time. They had $200 million in deficits,” Weiss argued. He said there were safety concerns that “affected the marketability of the drug and its commercial prospects.”
     Weiss said Vivus downplayed the safety concerns regarding cardiovascular issues by claiming “highly statistically significant improvements” during clinical trials.
     “You need to show something more than, ‘Gee, it’s a little too positive,'” Clifton said. “You haven’t pointed to something that is literally a false statement.”
     Weiss said Vivus created an impression that there were no cardiovascular risks, though the trials indicated some existed, which resulted in the delayed approval. There also were psychological risks, such as depression and potential suicide risks, which Vivus downplayed, he added.
     “The defendants created a false impression in the marketplace” that there were no psychological effects, Weiss said. When the FDA demanded additional testing, “there was a tremendous drop in the stock price,” which showed the impact of the misleading statements by Vivus, he said.
     Defending Vivus and its officers, Michael Charlson with Vinson & Elkins said concerns about the drug’s safety “were not significant” and that trials showed an increase of only one heartbeat per minute.
     He said that six of 16 members of a medical advisory committee agreed with Vivus about the drug’s safety and its likely approval by the FDA.
     “So near, yet so far, Clifton said. “If it had been 10 to six instead off six to 10, we probably wouldn’t be here today, but it was 10 to six, ultimately, the wrong way.”
     Charlson said “differences in clinical judgments” are not sufficient to support a securities fraud action.
     He said there is no evidence that Vivus and its officers did not believe the statements they made regarding the likelihood of obtaining FDA approval.
     “This was a combination therapy of two drugs that had been approved for use in the United States for decades. There were millions of patient-years of data on the safety profiles of the drugs” that were known to investors, Charlson argued. “Vivus disclosed the facts” and pointed out potential side effects of the drugs.
     “They say that we didn’t discuss safety, but we did,” Charlson continued. “Two days into the class period, Dr. Day told people on the safety side of things, there was a one beat per minute increase in heart rate observed. But he gave his opinion that the one beat per minute was not clinically significant, particularly in light of the improvements in cardiovascular function that were observed across the 45-person population that were in these clinical trials.
     “What the plaintiffs don’t do is to ever say that there was some fact internal to Vivus … that they actually believed that the one beat per minute increase in heart rate was significant. That’s missing, and that’s why this complaint is deficient.”
     The plaintiffs “contend that it’s not just a matter of medical significance but whether or not they thought it would have some impact on the approval,” Clifton said.
     Charlson said the company included “clear risk-disclosures” in its SEC filings that Qnexa included phentermine, which was an ingredient in the anti-obesity drug Fen-Phen, which the FDA pulled from the marketplace years earlier.
     Because Qnexa included phentermine, Vivus maintained that additional clinical testing might be required before obtaining FDA approval and that the drug might not be approved, Charlson said. He said that Vivus also discussed potential cardiovascular, psychiatric or cognitive and other issues with the drug.
     “It is just implausible to believe that the defendants would proceed” if clinical trials had shown the drug was not approvable, Charlson said.
     The class action seeks compensatory damages, attorney’s fees and costs.

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