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Schueneman v. Arena Pharmaceuticals, Inc.

United States District Court, S.D. California

July 21, 2017

TODD SCHUENEMAN, et al., Plaintiffs,
v.
ARENA PHARMACEUTICALS, INC., et al., Defendants.

          ORDER (1) DENYING LEAD PLAINTIFF'S MOTION TO COMPEL AND (2) GRANTING DEFENDANTS' MOTION TO COMPEL [ECF Nos. 113, 117]

          Barbara L. Major United States Magistrate Judge

         Currently before the Court is Lead Plaintiff's “Motion to Compel” [ECF No. 117-1 (“Pl.'s MTC”)], Defendants' “Motion to Compel Response to Interrogatory No. 8 Relating to Confidential Witnesses” [ECF No. 113-1 (“Defs.' MTC”)], Defendants' opposition to Lead Plaintiff's motion [ECF No. 120 (“Defs.' Oppo.”)], and Lead Plaintiff's opposition to Defendants' motion [ECF No. 121 (“Pl.'s Oppo.”)]. For the reasons set forth below, Lead Plaintiff's motion is DENIED and Defendants' motion is GRANTED.

         FACTUAL BACKGROUND

         The facts set forth are taken from the Consolidated Amended Class Action Complaint [ECF No. 43 (“Compl.”)] and Second Amended Complaint [ECF No. 59 (“SAC”)] or documents incorporated therein. The Consolidated Amended Class Action Complaint and the SAC allege that Arena Pharmaceuticals, Inc. (“Arena”) and its senior executives violated Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder by making materially false statements and/or omitting to disclose material facts concerning the safety and the completeness of the data needed for the U.S. Food and Drug Administration's (“FDA”) approval of Arena's developmental weight loss drug, Lorcaserin.[1]Compl.; SAC; see also Schueneman v. Arena Pharms., Inc., 840 F.3d 698, 709 (9th Cir. 2016) (finding that Lead Plaintiff's theory is that “Defendants intentionally withheld information material to the market's assessment of whether and when the FDA would likely approve [L]orcaserin”).

         To obtain FDA approval to market Lorcaserin, Arena had to demonstrate Lorcaserin's safety and efficacy based on non-clinical/pre-clinical animal studies and clinical trials on humans. Compl. at 12-13. As part of Lorcaserin's new drug application to the FDA, Arena was required to conduct a long-term study of the potential carcinogenesis on rats (“Rat Study”). Id. at 14. The Rat Study was a two-year non-clinical/pre-clinical carcinogenicity study on rats that began in 2007 and was designed to approximate a lifetime of human use and to assess the risk to humans. SAC at 5, 17.

         By February 2007, the Rat Study indicated that Lorcaserin caused mammary, brain, skin, and nerve-sheath tumors, including lethal, malignant mammary and brain tumors. Id. at 6. In September 2007, the FDA told Arena it was concerned that the Rat Study data reflected potential effects in humans and that Arena needed to dispel this concern with data on animals and humans exposed to Lorcaserin. ECF No. 61-5 at 7, Exhibit D.

         In April 2008, the FDA and Arena representatives met to discuss the causes of mammary tumors in rats and the FDA's concern about the tumors' significance to humans. ECF No. 61-5 at 8. The FDA approved Arena's written warning to humans in the clinical trials and told Arena that animal mechanistic studies and continued clinical studies of humans exposed to Lorcaserin could dispel its concern about the Rat Study data. Id. At that time, Arena representatives hypothesized that the tumors were attributable to a rodent-specific mechanism. Id. The FDA did not halt Lorcaserin's ongoing human clinical trials, but did request bi-monthly updates. SAC at 7-9, 18-20.

         Arena provided the bi-monthly updates until completion of the Rat Study and submission of the draft report on the Rat Study to the FDA on February 3, 2009. ECF No. 61-4 at 14, Exhibit C. Arena's bi-monthly updates included “initial reads” of data that were not reviewed by outside pathologists. Compl. at 20-22. The Rat Study concluded that “breast tumors developed at all doses, and that Lorcaserin caused brain tumors as well as many other malignant tumors.” SAC at 9, 22. Arena's final report to the FDA included a peer-reviewed analysis by “three [non-Arena] veterinary pathologists” who concluded there were fewer malignant tumors than Arena initially reported to the FDA, but there was an “apparent increase in aggressiveness of adenocarcinoma in rats administered Lorcaserin.” Compl. at 5, 8. Plaintiffs allege that the data submitted to the FDA failed to show that the results of the Rat Study were irrelevant to humans. SAC at 22.

         In December 2009, Defendants filed Lorcaserin's New Drug Application (“NDA”) and the FDA appointed the Advisory Committee, comprised of physicians and scientists, to discuss and vote on whether to recommend FDA approval for Lorcaserin. Compl. at 7. The Advisory Committee was scheduled to meet on September 16, 2010. Id. Investors first learned about the Rat Study data in September 2010, when the Advisory Committee voted 9-5 against recommending approval for Lorcaserin. Id. at 6-8.

         In October 2010, Arena publicly disclosed that the FDA completed its review of the NDA and found that it could not approve the NDA “in its present form” because it failed to demonstrate that the Rat Study was irrelevant to humans. Id. at 19-22.

         Plaintiffs allege that Defendants knew by the beginning of the Class Period (March 17, 2008 through January 27, 2011) that the Rat Study indicated that Lorcaserin caused cancer and yet failed to disclose that information to investors. Compl. at 14. Plaintiffs further allege that the negative results of the Rat Study and the FDA's concerns over the data constituted material facts that should have been, but were not, disclosed to investors and that instead of disclosing this information, Defendants repeatedly falsely represented that Lorcaserin was safe and made materially false and misleading representations about non-clinical study results. Id. at 54-55. Additionally, Plaintiffs allege that when the misrepresentations were disclosed and became apparent on the market, Arena's securities declined precipitously. Id. Plaintiffs allege that as a result of their purchases of Arena securities during the Class Period, they suffered economic loss. Id.

         LEGAL STANDARD

The scope of discovery under the Federal Rules of Civil Procedure is defined as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of discovery in resolving issues, and whether the burden or expense of the proposed discovery outweighs the likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.[2]

Fed. R. Civ. P. 26(b)(1).

         District courts have broad discretion to determine relevancy for discovery purposes. See Hallet v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002). District courts also have broad discretion to limit discovery to prevent abuse. See Fed.R.Civ.P. 26(b)(2) (instructing that courts must limit discovery where the party seeking the discovery “has had ample opportunity to obtain the information by discovery in the action” or where the proposed discovery is “unreasonably cumulative or duplicative, ” “obtain[able] from some other source that is more convenient, less burdensome, or less expensive, ” or where it “is outside the scope permitted by Rule 26(b)(1)”). Pursuant to Federal Rule of Civil Procedure 37, “a party may move for an order compelling disclosure of discovery.” Fed.R.Civ.P. 37(a)(1). The party seeking to compel discovery has the burden of establishing that its request satisfies the requirements of Rule 26. Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal. July 17, 1995). Thereafter, the party opposing discovery has ...


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