United States Court of Appeals 

For the First Circuit 

No. 15-2250 

LOCAL NO. 8 IBEW RETIREMENT PLAN & TRUST, on behalf of itself 

and all others similarly situated, 

Plaintiff, Appellant, 

v. 

VERTEX PHARMACEUTICALS, INC.; JOSHUA BOGER, Ph.D.; JEFFREY 

LEIDEN, Ph.D.; PETER MUELLER, Ph.D.; PAUL SILVA; ELAINE ULLIAN; 

NANCY J. WYSENSKI, 

Defendants, Appellees. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS 

[Hon. F. Dennis Saylor IV, U.S. District Judge] 

Before 

Torruella, Kayatta, and Barron, 

Circuit Judges. 

 Amanda F. Lawrence, with whom David R. Scott, Joseph P. 

Guglielmo, Beth A. Kaswan, Donald A. Broggi, and Scott + Scott, 

Attorneys at Law, LLP, were on brief, for appellant. 

 John F. Sylvia, with whom Andrew Nathanson, Matthew D. Levitt, 

Rebecca L. Zeidel, and Mintz, Levin, Cohn, Ferris, Glovsky and 

Popeo, P.C., were on brief, for appellees. 

October 3, 2016 
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KAYATTA, Circuit Judge. During the course of clinical 

trials for an experimental drug combination intended to treat a 

fatal lung disease, Vertex Pharmaceuticals, Inc. ("Vertex") 

announced interim results that overstated the improvement in lung 

function exhibited in a group of patients receiving the combination 

treatment. Following this announcement, Vertex's stock price rose 

from $37.41 per share to close at $64.85 three weeks later. It 

then lost some of its gain, dropping to $57.80, after Vertex 

corrected the initial release's overstatement. Acting on behalf 

of all those who acquired Vertex stock during the period in which 

the overstatement stood uncorrected, Local No. 8 IBEW Retirement 

Plan & Trust ("Local No. 8") filed this securities fraud class 

action complaint against Vertex and six past and current Vertex 

employees. The district court dismissed the complaint, finding 

that it failed to create a strong inference that the defendants 

had acted with scienter, the requisite mental state. See Local 

No. 8 IBEW Ret. Plan v. Vertex Pharm., Inc., 140 F. Supp. 3d 120, 

137 (D. Mass. 2015). We agree and so affirm. 

I. Background1

As one of the world's largest biotechnology companies, 

Vertex researches, develops, and sells treatments for a variety of 

 1 Because Local No. 8 appeals from a judgment granting the 

defendants' motion to dismiss, we take the facts alleged in the 

complaint as true and draw all reasonable inferences from those 
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ailments. In 1998, Vertex began working on drugs to combat cystic 

fibrosis, a fatal and as yet incurable lung disease. In early 

2012 it gained Food and Drug Administration ("FDA") approval to 

market a drug, Kalydeco, to treat patients with a rare form of the 

disease. This approval, along with a contemporaneous drop in the 

value of Vertex's stock due to Vertex's diminishing returns from 

another product line, prompted Vertex to focus its energies on 

developing a more broadly marketable cystic fibrosis treatment. 

In pursuit of this aim, Vertex explored a "combination 

therapy," in which a cystic fibrosis patient first undergoes a 

course of treatment with an experimental drug called VX-809 and 

only then begins taking Kalydeco. Hoping that this combination 

would be effective against the most common form of cystic fibrosis, 

Vertex began a three-phase clinical investigation required for FDA 

approval. See N.J. Carpenters Pension & Annuity Funds v. Biogen 

IDEC Inc., 537 F.3d 35, 39 (1st Cir. 2008) (describing the FDA 

approval process); 21 C.F.R. § 312.21 (describing the three phases 

of clinical investigation). On May 7, 2012, while the second phase 

of this process was ongoing, Vertex issued a press release 

announcing interim results drawn from roughly half of the 108 

enrolled patients.2 The press release focused in particular on 

 

facts in favor of Local No. 8. See In re Bos. Sci. Corp. Sec. 

Litig., 686 F.3d 21, 27 (1st Cir. 2012). 

2 Phase 2 trials are typically closely controlled, smallscale studies designed to evaluate an experimental treatment's 
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one of the principal markers used to evaluate the effectiveness of 

a cystic fibrosis treatment: lung function, as measured by the 

amount of air a patient is capable of exhaling in one second. 

According to the press release, 

[o]f those who received [the combination 

therapy], approximately 46 percent (17/37) 

experienced an absolute improvement from 

baseline to Day 56 [of the trial period] in 

lung function of 5 percentage points or more, 

and approximately 30 percent (11/37) 

experienced an absolute improvement from 

baseline to Day 56 of 10 percentage points or 

more. None of the patients treated with 

placebo (0/11) achieved a 5-percentage point 

or more improvement from baseline to Day 56 in 

lung function. 

The press release described these results as "exceed[ing] 

[Vertex's] expectations," although it cautioned that "complete 

data" were not yet available and that "the final outcomes of this 

clinical trial or future clinical trials . . . may be less 

favorable than the interim analysis reported today, or may not be 

favorable at all."3 

 

efficacy, as well as its short-term side effects and potential 

risks. See 21 C.F.R. § 312.21(b). 

3 Although the text of the press release was not incorporated 

into Local No. 8's complaint and was instead submitted by the 

defendants in support of their motion to dismiss, we may--as the 

district court did--nevertheless consider it at this stage because 

it is referenced in the complaint, it is central to Local No. 8's 

claim, and no party disputes its authenticity. See Schaefer v. 

Indymac Mortg. Servs., 731 F.3d 98, 100 n.1 (1st Cir. 2013). We 

also consider the subsequent press releases issued by Vertex on 

May 29, 2012 and June 28, 2012, both of which were submitted to 

the court below without objection. 
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The same day, Vertex held a conference call for media 

and investors. On the call, Vertex's Executive Vice President and 

Chief Scientific Officer, Peter Mueller ("Mueller"), described the 

interim results as "really, really fantastic" and went on to say, 

"I have never seen anything like this." Vertex's Chief Executive 

Officer ("CEO"), Jeffrey Leiden ("Leiden"), also expressed 

confidence in the results, saying that they were "driving us 

to . . . plan for potential market entries sooner than we had 

previously planned" and that, "[p]ending final data this summer 

and discussions with regulators, we look forward to accelerating 

the development of our [cystic fibrosis] combination regimen." 

Nancy Wysenski ("Wysenski"), at that time Vertex's Chief 

Commercial Officer and Executive Vice President, further noted 

that the number of patients who stood to benefit from the 

combination treatment under review exceeded 70,000--a market that 

could translate into billions of dollars in potential sales.4 

Vertex's stock price swiftly responded to the 

announcement of the promising interim results. On May 7, 2012, 

the day of the announcement, Vertex stock closed at $58.12 per 

share--up from the prior close of $37.41, with a trading volume 

 4 Vertex's Chief Financial Officer confirmed in a call the 

following day that "the data [were] beyond our expectations" and 

that Vertex sought "to drive . . . quickly into" the next phase of 

the clinical investigation in order to "get to . . . patients as 

fast as possible with this combination therapy." 
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forty times higher than average. By May 25, 2012, the closing 

price had risen to $64.85 per share. Meanwhile, five Vertex 

employees named as defendants in this suit--Joshua Boger 

("Boger"), then Vertex's Director; Paul Silva ("Silva"), who had 

formerly served as Vertex's Vice President and Corporate 

Controller; Elaine Ullian ("Ullian"), Vertex's co-lead independent 

director; Mueller; and Wysenski--sold a total of 539,313 shares of 

Vertex stock, collecting almost $32 million in all. 

On May 29, 2012, Vertex announced in a press release 

that the interim results that had so energized its market prospects 

had overstated the improvement in lung function exhibited among 

the Phase 2 patients receiving the combination treatment. The 

error, as Vertex acknowledged that day in a conference call, 

stemmed from a "misinterpretation" as to whether the results Vertex 

had received from the third-party statistical analysis vendor 

reflected the absolute improvement in the patients' lung function 

or, rather, the improvement relative to the patients' baseline 

levels of lung function.5 When evaluated properly, Vertex's press 

release explained, the data showed that 35 percent of the patients 

 5 According to the complaint, a relative improvement means "a 

percentage change from baseline," whereas an absolute improvement 

is "the numerical distance between the baseline measurement and 

the improved measurement." For our purposes, it appears that we 

need only understand the distinction to mean that an absolute 

improvement is more favorable than a relative improvement of the 

same percentage. 
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taking the combination treatment (rather than 46 percent, as had 

initially been reported experienced an absolute improvement of 5 

percent or more, and that 19 percent (rather than 30 percent, as 

had initially been reported) experienced an absolute improvement 

of 10 percent or more. Immediately following the announcement of 

the corrected results, the closing price of Vertex stock 

experienced its greatest decline in three years, dropping to $57.80 

per share, down from $64.85 per share on May 25, yet still well up 

from the May 4 close of $37.41. 

Just short of two years later, Local No. 8 filed a classaction complaint against Vertex--as well as Boger, Leiden, 

Mueller, Silva, Ullian, and Wysenski--on behalf of all those who, 

like Local No. 8, had acquired Vertex stock between the 

announcement of the overstated interim results on May 7, 2012, and 

the announcement of the corrected results on May 29, 2012. The 

complaint charged all defendants with securities fraud under 

section 10(b) of the Securities Exchange Act of 1934 ("Exchange 

Act"), 15 U.S.C. § 78j(b), and the Securities and Exchange 

Commission's Rule 10b-5, 17 C.F.R. § 240.10b-5. It also charged 

the six individual defendants with joint and several liability 

under section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for 

the alleged securities fraud, on the theory that these defendants 

"controlled Vertex, and/or controlled other Individual 

Defendants"; and charged Boger, Mueller, Silva, Ullian, and 
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Wysenski with insider trading under section 20A of the Exchange 

Act, id. § 78t-1(a). The gravamen of the alleged fraud, according 

to the complaint, is that, "[w]hen faced with . . . study results 

that seemed too good to be true, Defendants, rather than checking 

the results, turned a blind eye, accepting and promoting unlikely 

data that offered them a windfall on the sale of their stock." 

The defendants moved to dismiss for failure to state a 

claim, see Fed. R. Civ. P. 12(b)(6), arguing that the facts alleged 

in the complaint fail to generate a strong inference that the 

defendants acted with the mental state required to render them 

liable under section 10(b) and Rule 10b-5. The district court 

agreed. It found as well that Local No. 8's section 20(a) and 

section 20A claims could not survive in the absence of a proper 

section 10(b) and Rule 10b-5 claim, and dismissed the complaint. 

See Local No. 8, 140 F. Supp. 3d at 137. This timely appeal 

ensued. 

II. Analysis 

We review de novo the district court's grant of the 

defendants' motion to dismiss for failure to state a claim. 

Aldridge v. A.T. Cross Corp., 284 F.3d 72, 78 (1st Cir. 2002). 

A. Section 10(b) and Rule 10b-5 

To successfully state a securities fraud claim under 

section 10(b) and Rule 10b-5, a plaintiff must adequately allege, 

among other things, scienter. "Scienter . . . is 'a mental state 
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embracing intent to deceive, manipulate, or defraud.'" Id. at 82 

(quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 

(1976)). A plaintiff can establish scienter "by showing that 

defendants either 'consciously intended to defraud, or . . . acted 

with a high degree of recklessness.'" Miss. Pub. Emps.' Ret. Sys. 

v. Bos. Sci. Corp. ("Boston I"), 523 F.3d 75, 85 (1st Cir. 2008) 

(quoting Aldridge, 284 F.3d at 82). "Recklessness in this context 

is 'a highly unreasonable omission, involving not merely simple, 

or even inexcusable negligence, but an extreme departure from the 

standards of ordinary care.'" In re Smith & Wesson Holding Corp. 

Sec. Litig., 669 F.3d 68, 77 (1st Cir. 2012) (quoting Miss. Pub. 

Emps.' Ret. Sys. v. Bos. Sci. Corp. ("Boston II"), 649 F.3d 5, 20 

(1st Cir. 2011)). The omission must "present[] a danger of 

misleading buyers or sellers that is either known to the defendant 

or is so obvious the actor must have been aware of it." Id. 

(quoting Boston II, 649 F.3d at 20). This form of recklessness 

is "closer to a lesser form of intent" than it is to ordinary 

negligence. Greebel v. FTP Software, Inc., 194 F.3d 185, 199 (1st 

Cir. 1999).6

 6 Local No. 8 attempts to dilute this stringent standard by 

citing to a Ninth Circuit case, In re Oracle Corp. Sec. Litig., 

627 F.3d 376 (9th Cir. 2010), which stated that recklessness arises 

where the defendant "had reasonable grounds to believe material 

facts existed that were misstated or omitted, but nonetheless 

failed to obtain and disclose such facts although he could have 

done so without extraordinary effort," id. at 390 (quoting Howard 

v. Everex Sys., Inc., 228 F.3d 1057, 1064 (9th Cir. 2000)). While 
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To determine whether the complaint here adequately 

alleges that the defendants acted with this culpable mental state, 

we eschew the ordinary standards of Federal Rule of Civil 

Procedure 8(a)(2), which require only that the plaintiff "plead[] 

factual content that allows the court to draw the reasonable 

inference that the defendant[s] [are] liable for the misconduct 

alleged," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Instead, 

Congress has directed us to evaluate section 10(b) and Rule 10b-5 

claims of this type under the heightened pleading standards of the 

Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub. 

L. No. 104-67, 109 Stat. 737. See Aldridge, 284 F.3d at 78. As 

is relevant here, the PSLRA provides that a complaint must "state 

with particularity facts giving rise to a strong inference that 

the defendant[s] acted with [scienter]." 15 U.S.C. 

§ 78u-4(b)(2)(A). Under this standard, "[a] complaint will 

survive . . . only if a reasonable person would deem the inference 

of scienter cogent and at least as compelling as any opposing 

 

the Ninth Circuit has indeed recently applied this formulation of 

recklessness in assessing the adequacy of a complaint under the 

PSLRA, Reese v. Malone, 747 F.3d 557, 569 (9th Cir. 2014), even 

more recently it has rejected this same formulation as insufficient 

for assessing such a complaint, applying instead the formulation 

used in this circuit. In re NVIDIA Corp. Sec. Litig., 768 F.3d 

1046, 1053 & n.7 (9th Cir. 2014), cert. denied sub nom. Cohen v. 

Nvidia Corp., 135 S. Ct. 2349 (2015). In any event, however one 

might describe the law in the Ninth Circuit, we see no reason not 

to continue to apply a standard that makes clear that allegations 

of merely unreasonable conduct do not sufficiently plead scienter. 
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inference one could draw from the facts alleged." Tellabs, Inc. 

v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007). 

Local No. 8 argues on appeal that the complaint 

adequately alleges facts making it as likely as not that the 

defendants recklessly turned a blind eye to an obvious danger that 

the announced interpretation of the initial results was wrong.7 

To support this argument, Local No. 8 points to the cumulative 

probative force of seven facts alleged in the complaint. We are 

mindful that "[e]ach individual fact about scienter may provide 

only a brushstroke," but it is our obligation to consider "the 

resulting portrait." In re Cabletron Sys., Inc., 311 F.3d 11, 40 

(1st Cir. 2002). Accordingly, we examine each alleged fact in 

turn, and then conclude by assessing them cumulatively. 

First, Vertex itself described the results as 

unexpected, or as "exceed[ing] . . . expectations." The results 

were unexpected because, the complaint alleges, it was known 

"within Vertex" that VX-809 caused Kalydeco to "work less well." 

The fact remains, though, that Vertex made the investment necessary 

to design and perform a study testing the two drugs in combination. 

So, its puffing professions of surprise notwithstanding, Vertex 

 7 Local No. 8 contends that the district court improperly 

conflated the recklessness standard with an actual knowledge 

standard. We do not find the district court to have done so, but 

because we review the dismissal of Local No. 8's complaint de novo 

under the proper standard, the outcome of this appeal in no way 

depends on our so finding. 
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must have thought that positive results were possible, even if not 

probable. We suspect, too, that many studies of new pharmaceutical 

products result in surprises, both good and bad. 

This moves us to Local No. 8's second and related point, 

which arises from the complaint's allegations concerning the 

science of cystic fibrosis research. Local No. 8 alleges that 

cystic fibrosis research focuses on both "lung function and sweat 

chloride." Because cystic fibrosis progressively and eventually 

fatally obstructs the lungs, "pulmonary function is an important 

marker of cystic fibrosis lung disease severity." As a measure of 

pulmonary function, scientists test the patient for "Forced 

Expired Volume" ("FEV"). Local No. 8 alleges that scientists 

studying cystic fibrosis also measure "sweat chloride levels" 

because cystic fibrosis impairs the tissues of the sweat glands, 

thereby elevating the concentration of chloride in the patient's 

sweat. 

The interim results reported to and by Vertex showed 

increased FEV measurements, but no material drop in sweat chloride 

levels. Local No. 8 argues that some people have described sweat 

chloride levels to be the "gold standard" in cystic fibrosis 

research, and that "individuals at the Company were 'highly 

skeptical' of the study results because of the lack of sweat 

chloride improvements." Therefore, reasons Local No. 8, it was 

obvious that there was something wrong with the results. 
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Missing from the allegations is any contention that any 

defendant viewed the sweat chloride levels as incompatible with 

the FEV measurements, or that any of the unnamed individuals 

conveyed any such skepticism to any defendant. Greebel, 194 F.3d 

at 199; cf. Auto. Indus. Pension Trust Fund v. Textron Inc., 682 

F.3d 34, 39 (1st Cir. 2012) (inference that defendants suspected 

a statement was misleading is weaker where "warnings by 

subordinates or expressions of concern by executives are notably 

absent"). The complaint does not even allege that scientists in 

general, much less those at Vertex, regarded the reported results 

as implausible. And given that the final results reflected the 

same phenomenon (improved FEV and steady sweat chloride levels), 

there is no reason given here to presume that scientists in general 

must view the possibility of such results as obviously wrong. 

Notably, too, Vertex reported the sweat chloride levels in the 

same press release in which it reported the positive FEV results. 

So it would seem most likely that Vertex itself did not view the 

former as belying the latter, and neither apparently did the 

market.8 

 8 Contrary to Local No. 8's assertion, Boston I is not 

"particularly on point." In Boston I, we reversed the dismissal 

of a section 10(b) claim, 523 F.3d at 94, finding that the 

defendants' own statements in connection with a manufacturing 

change to a medical device could be read as an admission that the 

change had been made in response to a design defect that the 

defendants had not previously disclosed, see id. at 88. No such 

potentially facially incriminating statements are at issue here. 
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Third, Local No. 8 alleges that the study was very 

important to Vertex, and that it would therefore "be 'absurd' to 

suggest that Defendants were not aware of the suspect nature of 

the results." It is true that the importance of a particular item 

to a defendant can support an inference that the defendant is 

"paying close attention" to that item. Institutional Inv'rs Grp. 

v. Avaya, Inc., 564 F.3d 242, 271 (3d Cir. 2009). Such an 

inference, however, is only helpful in establishing scienter if 

that close attention would have revealed an incongruity so glaring 

as to make the need for further inquiry obvious. See id. at 270–

71 (noting that a "steep decline" in operating margins creates 

inference that Chief Financial Officer, who "was paying close 

attention to these numbers," would investigate the cause). We 

have already discussed why the complaint fails to establish that 

the announced results, on their face, contained such an obvious 

incongruity. 

Similarly, some cases have recognized that certain key 

facts known to lower-level company managers concerning a company's 

flagship product, such as whether a $100 million contract has been 

signed to sell the product, or that sales are falling fast rather 

than rising, are very likely known to senior management who made 

repeated public announcements concerning sales of the product. 

See, e.g., Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 

702, 706-10 (7th Cir. 2008). But the complaint here does not 
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allege that anybody at Vertex responsible for receiving, 

reviewing, and reporting the results had actually spotted the error 

in the interpretation of the results before the discovery that led 

to the second announcement. 

Fourth, Local No. 8 points to its allegation that the 

specific error in the publicly reported results--namely, the 

substitution of relative improvement for absolute improvement in 

lung function--was so "fundamental" that it should have been 

apparent to the Vertex pulmonologist responsible for receiving the 

raw data from the third-party vendor "regardless of how [the data] 

w[ere] presented by the vendor." The pulmonologist is not a 

defendant, however, and there is no allegation that any party 

responsible for the decision to announce the interim results 

received the raw data. The fact that a Vertex pulmonologist was 

the one who received the raw data actually cuts sharply against 

Local No. 8 because there is no allegation that even this 

pulmonologist noticed or suspected that Vertex's reported 

interpretation of the results was incorrect, or told anyone of any 

skepticism. The complaint does assert in conclusory fashion that 

the pulmonologist "should have known" of the error. Yet, the 

complaint tells us nothing about the precise form of the 

information conveyed by the vendor, or the vendor's reliability. 

Negligence by the pulmonologist, too, hardly gets Local No. 8 

anywhere. Rather, it adds a concrete reason why the erroneous 
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interpretation of the study results would not have been obvious to 

the executives to whom the pulmonologist reported the results. 

Even making the reasonable inference, as Local No. 8 

urges, that the defendants had access to the raw data--review of 

which would allegedly have rendered the error obvious through 

"simple math"--we have already determined that the complaint's 

allegations are insufficient to establish that the erroneously 

interpreted end results (which are all the individual defendants 

are alleged to have received) were themselves so obviously suspect 

that we can draw a strong inference that the defendants were 

reckless in failing to consult the raw data themselves for 

verification.9

Fifth, in its appellate brief, Local No. 8 also observes 

that it is "rare[]" to publish interim results and implies that 

Vertex's decision to do so here is probative of scienter. However, 

the complaint nowhere alleges that the publication of interim 

results was anomalous, and so we do not consider this argument in 

assessing whether the complaint has stated a claim. Nor does Local 

No. 8 point to any legal requirement, or any undertaking by Vertex, 

 9 At oral argument, counsel for Local No. 8 noted that, prior 

to discovery, few plaintiffs will be in a position to make specific 

allegations about the form of internal documents. "But while a 

trawl through archives may sometimes catch a few fish, Congress," 

for reasons of its own, "deliberately raised the entry bar to 

discovery . . . through the PSLRA's heightened pleading standards." 

Textron, 682 F.3d at 40. 
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that obligated the company to double-check the interim results 

before announcing them. 

Sixth, we have considered Local No. 8's allegations that 

the defendants had a financial motive to "turn[] a blind eye" to 

the erroneous interpretation of the interim results because of the 

stock price spike precipitated by the error. Cf. Aldridge, 284 

F.3d at 83 ("When financial incentives to exaggerate [material 

information] go far beyond the usual . . . , they may be considered 

among other facts to show scienter." (emphasis supplied)). Here, 

several facts strongly suggest that at least Vertex's CEO, Leiden, 

had no motive to ignore an error that was obvious and that would 

therefore soon become known. Leiden, who touted the erroneous 

interim results as driving Vertex "to accelerat[e] the development 

of [its] [cystic fibrosis] combination regimen," is not alleged to 

have sold any stock during the class period. Local No. 8 contends 

that this was "a major study that . . . was central to [Vertex's] 

prospects." Announcing good results on such a study would have 

been clearly better for Vertex than announcing great results only 

to reduce them to good results by shortly thereafter confessing 

error, thereby harming the company's credibility and its 

reputation for competence. Combined with the foregoing points, 

this fact makes it quite unlikely (and certainly less than 50-50) 

that any error was so obvious that Leiden must have known that the 
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results were mistaken (and would therefore soon have to be 

withdrawn or corrected). 

Local No. 8 therefore places its focus on the fact that 

the other five defendants sold almost $32 million worth of stock 

following release of the overstated interim results. According to 

the complaint, these sales were "unusual when compared to [the 

individual defendants'] trading history before and after" the 

three-week class period. Local No. 8 argues that this unusual 

activity, together with the inferences that can be drawn from the 

defendants' failure to double-check the interim results, makes 

"the inference that Defendants turned a blind eye to the suspect 

test results to line their own pockets . . . at least as strong" 

as an inference of negligence. 

It is well settled that "[i]nsider trading in suspicious 

amounts or at suspicious times may be probative of scienter." 

Boston I, 523 F.3d at 92 (citing Greebel, 194 F.3d at 197; 

Greenstone v. Cambex Corp., 975 F.2d 22, 26 (1st Cir. 1992)). At 

the outset, however, it bears noting that, in addition to Leiden, 

defendant Boger did not engage in any inconsistent trading behavior 

during the class period. Boger, who was Vertex's Director at the 

time, sold consistently small amounts of stock on a more or less 

weekly basis before, during, and after the class period. 

So, to regard the stock sales as either motive for the 

fraud or evidence of the defendants' knowledge that the interim 
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study results had been misinterpreted, we must hypothesize either 

that the error was obvious only to those defendants who made 

unprecedented sales, or that it was obvious to all, yet the 

Director and CEO nevertheless went along with announcing obviously 

flawed results. The complaint, though, offers no fact suggesting 

that the sellers knew more than the nonsellers. To the contrary, 

the largest seller, Wysenski, was not a scientist. And our 

discussion of Leiden's salient interests and motive renders a 

stretch any inference that he would have gone along with announcing 

obviously erroneous results. 

The complaint's chronology also offers a simple 

alternative explanation of the stock sales. After a long period 

of steady or dropping stock prices, the stock price suddenly jumped 

a large amount. Such an increase--no matter what its cause--

creates a substantial incentive for holders to sell unless they 

believe the price will continue to rise and are willing to wait. 

Sales in the historical context described in the complaint carry 

little force in implying knowledge that the stock will drop.10 All 

in all, the presence of this perfectly understandable, innocent 

 10 By contrast, consider a case of more or less steady stock 

price, followed by a nonpublic adverse event, inside sales, and 

then public disclosure of the adverse event. See, e.g., SEC v. 

Rocklage, 470 F.3d 1, 3–4 (1st Cir. 2006). 
- 20 - 

reason to sell, combined with the poor fit between the facts and 

Local No. 8's theory, leaves us short of the scienter mark.11

Seventh, there is, finally, the fact that Vertex 

announced the retirement of Wysenski, aged fifty-four at the time, 

"suddenly and without any forewarning" on June 8, 2012--just one 

day after Iowa Senator Charles Grassley had sent a letter to 

Securities and Exchange Commission Chairwoman Mary Shapiro asking 

her to probe whether "Vertex . . . executives . . . took advantage 

of the spike in the stock knowing the news of the clinical data 

being overstated would be made public eventually, which in turn 

would negatively affect the stock value." From these 

circumstances, Local No. 8 asks us to infer (1) that the defendants 

were aware of Senator Grassley's letter, and (2) that the letter 

prompted Wysenski's retirement (3) because it correctly exposed 

that Wysenski, at a minimum, had deliberately turned a blind eye 

to the risk that the announced interim results were erroneous. 

 11 Local No. 8 cites a Ninth Circuit case, No. 84 EmployerTeamster Joint Council Pension Trust Fund v. America West Holding 

Corp., 320 F.3d 920 (9th Cir. 2003), which it describes as 

"analogous." However, a major factor in the America West court's 

determination that the stock sales at issue were "unusual and 

suspicious," id. at 940, was the fact that "[m]ost of the [alleged 

insiders] sold 100% of their shares, with the lowest percentage 

being 88%," id. at 939. Here, by contrast, the two most senior 

defendants made no sales out of the ordinary course, and the 

complaint contains no allegation as to what proportion of his or 

her total stock any other defendant sold during the class period. 
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These allegations both point a finger at Wysenski and 

tend to exculpate the others who did not retire or leave the 

company. The question is whether they add enough to permit a claim 

against Wysenski; i.e., whether they make "the inference of 

scienter . . . at least as compelling as any opposing inference 

one could draw from the facts alleged." Tellabs, 551 U.S. at 324. 

It is reasonable to infer that Vertex knew of Senator Grassley's 

letter,12 and that Wysenski's departure had something to do with 

her stock sales. But Local No. 8 must take us a step further. 

For Local No. 8 to prevail, we would need to infer that Wysenski 

left or was pushed out for a particular reason; i.e., because she 

had unlawfully misled the market. If that were the reason, though, 

it would have applied to all defendants because the complaint makes 

no suggestion that Wysenski (a nonscientist handling marketing) 

knew anything more about the test results than did the others (who 

neither left nor were forced out in this timeframe). 

 12 When asked about this point at oral argument, counsel for 

Local No. 8 stated, wrongly, that the complaint alleged that 

Senator Grassley's letter was publicly available, rather than 

asking us to take judicial notice of contemporaneous news reports 

establishing that the letter was indeed public. See, e.g., Beth 

Healy, US Senator Charles Grassley Raises Vertex Stock Profits 

Issue with SEC Chief, Boston Globe, June 7, 2012, available at 

https://www.bostonglobe.com/business/2012/06/07/senator-charlesgrassley-raises-vertex-stock-profits-issue-with-secchief/cogtZEGDw2GhiDGt5DNbIK/story.html. Because we do not find 

this point to be dispositive, we do not decide whether we would 

otherwise elect to take such notice sua sponte. 
- 22 - 

Alternative explanations abound. Wysenski's very large 

sales and the spotlight focused on those sales could have given 

rise to her retirement without any hint of fraud. Large insider 

sales by a senior manager, regardless of the reason for such sales, 

can present a major embarrassment for a company. Perhaps 

negligence by Wysenski in preparing the erroneous press release 

prompted a forced retirement. Picking among these explanations, 

without the benefit of factual allegations suggesting Wysenski 

knew something the other defendants did not know, depends on a 

degree of guesswork inconsistent with the PSLRA pleading standard. 

Cumulatively, the brushstrokes here do not paint the 

required strong inference of scienter. Vertex's public 

description of a scientific study contained an error that made 

unexpectedly good results look even better than they were; there 

is no claim that the pulmonologist who received and reviewed the 

raw data behind the results noticed or reported the error to 

company executives; the company's CEO, a scientist, had no 

plausible reason to announce results infected with an error that 

would most likely soon mar otherwise good news and harm Vertex by 

leading to an embarrassing correction; and there is no claim that 

the other defendants possessed any additional information. Given 

the foregoing, the stock sales by some of the individual defendants 

and the timing of Wysenski's retirement (which might otherwise 

look very different) cover too little canvas to evoke inferences 
- 23 - 

of scienter strong enough to equal the alternative inference that 

Vertex was negligent in viewing very good results as being even 

better than they in fact were. 

Accordingly, the allegations underlying Local No. 8's 

claim that the defendants acted with scienter fall short of what 

Congress demands in the securities fraud context. We therefore 

affirm dismissal of the section 10(b) and Rule 10b-5 claim. 

B. Section 20(a) and 20A 

Local No. 8 concedes that its remaining claims are 

derivative of its section 10(b) and Rule 10b-5 claim. Because we 

conclude that the district court properly dismissed the latter, it 

follows that the district court properly dismissed the former. We 

therefore affirm the dismissal of Local No. 8's remaining claims. 

III. Conclusion

Under the PSLRA, this action can only move forward if we 

find that the allegations make it at least as likely as not either 

that the defendants knew the results as reported were wrong, or 

that it was obvious to the defendants that they would discover the 

error if they looked. Because we, like the district court, cannot 

so find, we affirm the dismissal of the complaint.