Justia Securities Law Opinion Summaries

A pharmaceutical company developed a sublingual opioid painkiller, DSUVIA, which could only be administered in medically supervised settings due to safety concerns and was subject to a strict FDA Risk Evaluation and Mitigation Strategy (REMS). The company marketed DSUVIA with the slogan “Tongue and Done” at investor conferences, accompanied by additional disclosures about the drug’s limitations and REMS requirements. After the FDA issued a warning letter objecting to the slogan as potentially misleading under the Federal Food, Drug, and Cosmetic Act, several shareholders filed suit, alleging that the slogan misled investors about the complexity of administering DSUVIA and the drug’s limited market potential.The United States District Court for the Northern District of California dismissed the shareholders’ complaint, finding that the plaintiffs failed to adequately plead facts supporting a strong inference of scienter, but did not rule on whether the statements were false or misleading. The plaintiffs were given two opportunities to amend their complaint, but the court ultimately dismissed the case with prejudice.On appeal, the United States Court of Appeals for the Ninth Circuit reviewed the dismissal de novo. The Ninth Circuit held that the plaintiffs failed to adequately plead falsity because a reasonable investor would not interpret the “Tongue and Done” slogan in isolation, but would consider the context provided by accompanying disclosures and other available information. The court also held that the FDA’s warning letter did not establish falsity under securities law, as the standards and intended audiences differ. Additionally, the court found that the plaintiffs did not plead a strong inference of scienter, as the facts suggested the company’s officers acted in good faith. The Ninth Circuit affirmed the district court’s dismissal. View "Sneed v. Talphera, Inc." on Justia Law

The First Circuit affirmed the judgment of the district court dismissing this complaint against Karoypharm Therapuetics, Inc. and its corporate officers (collectively, Defendants) alleging securities fraud in violation of sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. 78j(b) and 78t(a), and Securities and Exchange Commission (SEC) Rule 10-b, 18 C.F.R. 240.10b-5, holding that the district court correctly dismissed the complaint for failure to state a claim.Plaintiff-investors brought this action following a decline in Karyopharm's stock price, alleging that Karyopharm materially misled them as to the safety and efficacy of the company's cancer-fighting drug candidate selinexor. The district court dismissed the complaint for failure to state a claim, concluding that Plaintiffs failed adequately to plead scienter with respect to Defendants' statements about a certain study of the drug as a treatment for pinta-refractory multiple myeloma. The First Circuit affirmed on other grounds, holding that Plaintiffs did not plausibly allege an actionable statement or omission with respect to the trial disclosures, and therefore, dismissal was appropriate. View "Thant v. Karyopharm Therapeutics Inc." on Justia Law

The First Circuit affirmed the judgment of the district court in favor of Defendants, denying Plaintiff's motion for class certification, and denying Plaintiff's motion to file a third amended complaint, holding that Defendant sufficiently warned investors about the vulnerability of its manufacturing infrastructure so that Plaintiff knew of the investment risks when he purchased his shares.Plaintiff was an investor who lost money when he bought stock in Keryx Biopharmaceuticals, Inc. and watched the value plummet soon after that purchase. Plaintiff sued Keryx and its executives, alleging that Keryx's inadequate disclosures about its manufacturing defects amounted to securities fraud. The district court allowed Defendants' motion for judgment on the pleadings. The First Circuit affirmed, holding that Plaintiff failed to state a claim under section 10(b) of the Securities Exchange Act. View "Karth v. Keryx Biopharmaceuticals, Inc." on Justia Law

The First Circuit affirmed the district court's denial of Defendant's motion for judgment as a matter of law and for a new trial in this civil enforcement action brought by the Securities and Exchange Commission, holding that the evidence was sufficient to support the verdict.At issue was whether Defendant, the CFO of AVEO Pharmaceuticals, knowingly misled investors by the manner in which he responded to investor inquiries about the substance of AVEO's discussions with the Food and Drug Administration (FDA) about the results of AVEO's clinical trial for tivozanib, a kidney cancer drug candidate. A jury found against Defendant. On appeal, Defendant argued (1) he was entitled to judgment as a matter of law because he had no duty to disclose the substance of the FDA discussions and because the evidence of scienter was insufficient, and (2) he was entitled to a new trial because the district court improperly instructed the jury. The Supreme Judicial Court affirmed, holding (1) the evidence of fraud and scienter was sufficient to support the verdict; and (2) the challenged instructions were not given in error. View "Securities & Exchange Commission v. Johnston" on Justia Law

Plaintiffs filed a class action under S.E.C. Rule 10b-5, 17 C.F.R. 240.10b-5, following the failure of NewLink's Phase 3 clinical trial for a novel pancreatic cancer drug and the resulting decline in the market value of NewLink shares.The Second Circuit held that defendants' statements about the efficacy of their pancreatic cancer drug were puffery, not material misrepresentations. However, the court held that plaintiffs plausibly pled material misrepresentation and loss causation for defendants' statements about the scientific literature and the design of their clinical trial. Therefore, the court affirmed the district court's dismissal in part regarding the 2013-2016 Assessments; vacated the dismissal in part regarding the September, March, and Enrollment statements; and remanded for further proceedings. View "Nguyen v. NewLink" on Justia Law

In this complaint alleging that Defendants intentionally or recklessly misled investors about Ocular Therapeutix, Inc.'s manufacturing problems the First Circuit affirmed the judgment of the district court dismissing Plaintiffs' complaint for failure to state a claim, holding that Plaintiffs failed to allege facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4, 78u-5.In 2015, Ocular submitted a new drug application to the FDA for approval of Dextenza. In 2017, the FDA published its observations of issues at Ocular's manufacturing facility, which resulted in a drop in the company's stock price. Plaintiffs, several shareholders, brought this securities fraud action on behalf of themselves and a putative class of investors alleging violations of section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b) and section 20(a) of the Exchange Act, 15 U.S.C. 78t(a). The district court dismissed the complaint pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6), the Exchange Act, and the PSLRA. The district court granted the motion and dismissed the complaint with prejudice. The First Circuit affirmed, holding that Plaintiffs did not allege facts giving rise to a strong inference of scienter as required by the PSLRA. View "In re Ocular Therapeutix Inc." on Justia Law

Esperion has never generated any revenue, relying solely upon investor funding. Esperion’s sole focus is the development of ETC-1002, a first-in-class oral medication for lowering LDL “bad cholesterol,” a significant risk factor in cardiovascular disease. Esperion hopes to market ETC-1002 as an alternative treatment for statin-intolerant patients and as an add-on for patients are unable to reach their recommended levels using statins alone. In 2015, Esperion had completed several clinical studies and reported that ETC-1002 was well-tolerated and demonstrated significant average LDL-cholesterol reductions. After a meeting with FDA officials regarding Phase 3 of the approval process, Esperion published a press release, stating that “[b]ased upon feedback from the FDA, approval of ETC-1002 in [specific] patient populations will not require the completion of a cardiovascular outcomes trial,” with cautionary language, suggesting that “Esperion may need to change the design of its Phase 3 program once final minutes from the FDA meeting are received.” Market reaction was mostly positive. Following its receipt of the final FDA minutes, Esperion published another press release, indicating that the “FDA has encouraged the Company to initiate a cardiovascular outcomes trial promptly.” Esperion’s stock dropped 48% the next day. Plaintiffs, the purchasers of Esperion common stock between the two press releases, brought a class action under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5. The Sixth Circuit reversed the district court holding that Plaintiffs failed to adequately plead a strong inference that Esperion’s CEO willfully or recklessly made misleading statements. Plaintiffs adequately alleged scienter. View "Dougherty v. Esperion Therapeutics, Inc." on Justia Law

The First Circuit affirmed the district court’s finding, in this securities fraud class action against Sarepta Therapeutics, Inc. and former and current Sarepta executives, that Plaintiffs, several shareholders, failed to allege facts creating a strong inference that Defendants intentionally or recklessly deceived the investing public in the months before the Food and Drug Administration deemed premature Sarepta’s application for approval of a novel gene therapy. The price of the publicly traded securities issued by Sarepta dropped sixty-four percent after the FDA judged Sarepta’s filing premature. Plaintiffs allegedly that Defendants overstated the significance of certain data and exaggerated the likelihood that the FDA would accept a new drug application for filing, thereby deceiving the investing public and causing the purchase of Sarepta securities at inflated prices. The First Circuit affirmed the district court’s dismissal of this action, holding that Plaintiffs failed to satisfy the requisite pleadings standards. View "Corban v. Sarepta Therapeutics, Inc." on Justia Law

The First Circuit affirmed the district court’s dismissal of this putative class action alleging violations under sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The district court concluded that the initial amended complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Thereafter, the court denied Plaintiffs’ subsequent motion to vacate the judgment and for leave to file a second amended complaint to include purportedly new evidence. The First Circuit held, on de novo review, that (1) the initial amended complaint failed to plead particularized facts giving rise to a strong inference of scienter, as required by the PSLRA; and (2) the district court did not abuse its discretion in denying the motion to vacate the judgment and for leave to file a second amended complaint. View "In re Biogen Inc. Securities Litigation" on Justia Law

Zafgen Inc.’s investors (Investors) brought a securities fraud class action suit against Zafgen and its Chief Executive Officer (collectively, Defendants) following a significant drop in the share price of the company. Specifically, Investors alleged that the Defendants made several misleading statements regarding Zafgen’s anti-obesity drug Beloranib. The district court granted Defendants’ motion to dismiss, concluding that the complaint did not contain facts giving rise to a “cogent and compelling” inference of scienter as required under the Private Securities Litigation Reform Act. The First Circuit affirmed, holding that the district court properly dismissed Investors’ claims because the complaint, considered as a whole, did not present allegations giving rise to a cogent and compelling inference of scienter. View "Brennan v. Zafgen, Inc." on Justia Law