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. e du/thir dc ir c uit_2014/542PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

___________

No. 13

- 2314

___________

CITY OF EDINBURGH COUNCIL AS ADMINISTERING AUTHORITY FOR THE LOTHIAN PENSION FUND;
ARCA S.G.R.S.P.A

, Appellant

v.

PFIZER, INC., as successor in interest to WYETH, a
D elaware Corporation; ROBERT ESSNER; BERNARD POUSSOT; KENNETH J. MARTIN; ROBERT R. RUFFOLO; WYETH

_______________________
On Appeal from the United States District Court for the District of New Jersey
D.C. Civil Action No. 2

- 10

- cv

- 03105 (Honor able Susan D. Wigenton)

______________
Argued: January 8, 2014

Before: SMITH, SHWARTZ, and SCIRICA, Circuit Judges.

(Filed : June 6, 2014 )2 Jeffrey A. Almeida, Esq.
Grant & Eisenhofer
123 Justison Street Wilmington, DE 19801

Daniel L. Berger, Esq. [AR GUED] Deborah A. Elman, Esq.
Grant & Eisenhofer 485 Lexington Avenue
29th Floor New York, NY 10017

Gregory M. Castaldo, Esq. Joshua E. D'Ancona, Esq. Michael K. Yarnoff, Esq. Kessler, Topaz, Meltzer & Check 280 King of Prussia Road Radnor, PA 19087 Counsel for Appellants

John Villa, Esq. [ARGUED] George A. Borden, Esq. David R.J. Riskin, Esq. Williams & Connolly 725 12th Street, N.W. Washington, DC 20005

Stephen C. Matthews, Esq. Porzio, Bromberg & Newman 100 Southgate Parkway Morristown, NJ 079 62 Counsel for Appellees3 _________________

OPINION OF THE COURT

_________________

SCIRICA

, Circuit Judge

In this private securities fraud class action under the Private Securities Litigation Reform Act of 1995 (“PSLRA”)

, two institutional investor s allege a pharmaceutical company
and its executives made materially false and misleading statements in violation of the Securities Exchange Act of
1934 (the “Exchange Act”) regarding interim clinical trial data related to the development of an experimenta l Alzheimer’s drug. The District Court granted defendants’
motion to dismiss for failure to state a claim under Rule 12(b)(6) of the F ederal Rules of Civil Procedure . We will
affirm. 1

I.

P laintiffs

- appellants City of Edinburgh Council as Administering Au thority for the Lothian Pension Fund and Arca S.G.R. S.p.A. (the “Funds”) 2 bring suit on behalf of a class of investors who purchased Wyeth, Inc. common stock

1 The District Court had jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa. We have jurisdiction under 28 U.S.C. § 1291.

2 Security Police and Fire Professionals of America Retirement Fund, a lead plaintiff below, is not a party to this appeal.4 between May 21, 2007

, and July 29, 2008 (the “Class Period”). The Funds allege Wyeth and four fo rmer Wyeth
executives

— defendants Robert Essner, Bernard Poussot, Jr., Kenneth J. Martin, and Robert R. Ruffolo, Jr.

— made materially false and misleading statements regarding the development of the experimental Alzheimer’ s drug bapineuzumab. Defendant Pfiz er Inc. is the successor

- in

interest to Wyeth, which it acquired in 2009.

The Funds bring three claims: ( 1 ) securities fraud under section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),
and S ecurities and Exchange Commission (“SEC”) Rule 10b

5 ; ( 2 ) contr ol person liability under section 20a of th e Exchange Act, 15 U.S.C. § 78t; and ( 3 ) insider trading under section 20A of the Exchange Act, 15 U.S.C. § 78t

- 1(a). 3

A.

Approximately 5 million Americans and 26 million people worldwide suffer from Alzh eim er’s disease

. Wyeth
and Elan Corporation, plc (“ Elan ”), 4 an Ireland

- based pharmaceutical company, embarked on a joint venture to

3 Beca use the District Court granted d efendants’ Rule 12(b)(6) motion to dismiss, we assume the Funds’ well

pleaded, nonconclusory factual allegations to be true. See Ashcroft v. Iqbal , 556 U.S. 662, 678

– 79 (2009). We may

c onsider documents incorporated into the complaint, Institutional Investors Grp. v. Avaya, Inc. , 564 F.3d 242, 252 (3d Cir. 2009), and take judicial notice of SEC filings, Oran v. Stafford , 22 6 F.3d 275, 289 (3d Cir. 2000).

4 Perrigo Company plc acquired El an in 2013.5 develop an Alzheimer’s treatment that , unlike other drugs
then on the market

, would target the underlying causes of the
disease . T his joint venture produced bapineuzumab , which is designed to treat mild to moderate Alzheimer’s. As required by Food and Drug Administration (“FDA”) regulations, Wyeth and Elan launched clinical t rials to assess the efficacy and safety of bapineuzumab i n treating Alzheimer’s. 5 In 2006, Wyeth and Elan completed Phase 1 trial s of bapineuzumab and received Fast Track status from the FDA. 6

B efore announcing Phase 1 results, Wyeth and Elan began the

5 FDA regulations require three phases of clinical trials

— which may overlap

— to assess the efficacy and safety of potential new treatments. 21 C.F.R. § 312.21. Phase 1 tests the drug’s efficacy and safety on a small number of patients.
Phase 2 is a controlled clinical study in which various doses of the drug are tested on groups of up to several hundred patients to evaluate preliminary indicia of the drug’s efficacy and safety. Phase 3 studies

— randomized, multicenter trials on large patient g roups over an extended period

— aim to provide sufficient evidence of efficacy and safety to support FDA approval to market the drug.

6 Fast Track status entitled the companies to priority oversight from the FDA, including an accelerated path to approval an d more frequent communications with the FDA

. See Fast Track, Breakthrough Therapy, Accelerated Approval and Priority Review , FDA, http://www.fda.gov/forconsumers/byaudience/forpatientadvo cates/speedingaccesstoimportantnewtherapies/ucm128291.ht

m (last visi ted June 4 , 2014). Only drugs intended to treat
serious or life

- threatening diseases for which there is a significant unmet medical need qualify for Fast Track status.6 Phase 2 trial, a controlled, double

- blind study designed t o measure the efficacy of bapineuzumab compared to a placebo. The companies measu red bapineuzumab’s efficacy using two tests, the Alzheimer’s D isease Assessment Scale

Cognitive (“ADAS

- cog”) and the Disability Assessment
Scale for Dementia (“DAD”)

.

The Ph ase 2 trial was not scheduled for completion until 2008, and Wyeth and Elan said they did not expect to release any Phase 2 trial data until that time. The focus o f the Funds’ complaint is a joint press release issued on May 21, 2007 (the “May 2007 Releas e”)

, announcing the companies’
decision to initiate a Phase 3 clinical trial , subject to FDA approval

, in the second half of 2007 . The May 2007 Release
stated (emphasis added) :

Elan

. . . and Wyeth

. . . today announce the
decision to initiate a Phase 3 clinical program

o f

. . . Bapineuzumab.

. . . This decision was
based on the seriousness of the disease and the totality of what the companies have learned from their immunotherapy programs, including
a scheduled Interim look at data from an ongoing Phase 2 study, which remains blinded. No conclusion about the Phase 2 study can be drawn until the study is completed and the final data are analyzed and released in 2008 . Phase 3 clinical trial design will be finalized with regulatory agencies, and subject t o regulatory approval , it is intended for the trial to beg in in
the second half of 2007.

The Funds contend that a t the time Wyeth issued the May7 2007 Release the company knew

— but did not disclose

— that the Phase 2 interim results did not support the decis ion to
initiate the Phase 3 trial. 7 The Funds’ two confidential
witnesses 8 allege the interim results showed bapineuzumab had failed pre

- specified criteria for efficacy and revealed serious adverse safety risks. Wyeth disputes this allegation

, arguing th e Phase 2 results showed “statistically significant and clinically meaningful benefits ” among an important patient subgroup

— non

- carriers of the Apolipoprotein E4 (“ApoE4”) gene who are believed to make up 40 to 70 percent of Alzheimer’s patients , or approx imately 2 to 3.5
million Americans

. Further, Wyeth contends CW1 ’s
statements confirm its interpretation of the subgroup data

— CW1 noted the Phase 2 interim results were “interesting” and “warranted further testing” with regard to non

- carriers of the ApoE4 gene but only as an additional Phase 2 trial, not as a Phase 3 trial. And Wyeth notes it had to obtain FDA

7 The Funds also allege defendants Martin and Ruffolo profited from the concealment of the poor Phase 2 interim results by exercising and selling stock options on May 22,
2007.

8 The Funds’ confidential witnesses are former high

- ranking Wyeth executives who performed extensive work related to the development of bapineuzumab during the Class Period. Confidential witness 1 (“CW1”) was a member of Wyeth’s Neuroscience Steering Committee and Bapineuzumab Steering Committee. Confidential witness 2 (“CW2”) was a member of Wyeth’s Research and Development (“R&D”)
Committee. The confidential witne sses provided their evidence through affidavits.8 approval to initiate the Phase 3 trial, 9 on which the companies spent “millions of dollars of their own assets.”

The Funds also argue the May 2007 Release was misleading in light of a prior statement made on October 5, 2006, by defendant Ruffolo, Wyeth’s head of research, at the company’s annual meeting for securities analysts

. Ruffolo stated orally that the companies planned to conduct an interim

r eview of the Phase 2 results at the end of 2006 in order to determine whether and how to proceed to a Phase 3 trial:

Now, again, we don’t have any results from this [Phase 2] study at all, but we have a planned interim look at the data at the end of the y ear. And, based on this interim look, we could do two things. One, depending on the data, we could advance directly into Phase III in the first half of 2007, but the results would have to be spectacular. We don’t know what results we’re going to get. A lternatively, we could complete the study and then move to the next interim look, which would be in the first half of 2007.

9 The FDA approves a Phase 3 trial, which typically includes far more subjects than a Phase 1 or Phase 2 trial, where there is “preliminary evidence suggesting effectiveness.” 21 C.F.R. § 312.21(c). But th e FDA retains the ability to suspend a clinical trial through a clinical hold, id. § 312.42, or to terminate a clinical trial if there is “convincing evidence that the drug is not effective for the purpose for which it is being investigated” or the trial p oses “an unreasonable and significant risk of illness or injury,” id. §§ 312.44(b)(1)(i), (b)(2)(i), (b)(2)(iii).9 Despite defendants’ explicit warning in the May 2007
Release that “[n]o conclusion about the Phase 2 study can be
drawn” and that i nitiation of Phase 3 would be “subject to regulatory approval,” the Funds allege Ruffolo’s remarks led
them to interpret the May 2007 Release ’s statement that the Phase 3 trial would commence early based in part on the
Phase 2 interim results to mean those results were “spectacular

. ”

On June 17, 2008, Wyeth and Elan issued a press release (the “June 2008 Release”) disclosing “preliminary findings” from the Phase 2 study. The June 2008 Release reported that the Phase 2 trial failed to meet its objectives a s to the entire study population and reported serious adverse

events among both placebo

- and bapineuzumab

- treated patients

. But it noted that based on “[p]ost

- hoc analyses,” bapineuzumab showed “statistically significant and clinically meaningful benefits ” among non

- carriers of the ApoE4 gene who are believed to make up 40 to 70 percent of Alzheimer’s patients

. Accordingly, the June 2008 Release announced the companies ’ conclusion that the results of the Phase 2 trial, as well as its safety findings, supp orted the decision to proceed
with the Phase 3 trial

. 10

On July 29, 2008, Wyeth and Elan revealed the Phase 2 results through a joint press release, conference

10 The Funds also alleged Wyeth and Elan committed securities fraud through factual omissions in the June 2008
Release. The District Court hel d the June 2008 Rele ase was not actionable because d efendants had no duty to disclose the allegedly omitted information, and the Funds do not challeng e that determination on appeal.10 presentation, and investor conference call. Despite the
disclosure in the June 2008 Release tha t the Phase 2 trial had failed to meet its overall objectives, the Funds contend
investors only learned for the first time on July 29 that the Phase 2 trial was nearly a complete failure

— the results showed no efficacy and revealed serious safety concerns. According to CW1 , the final Phase 2 results did not differ significantly from the Phase 2 interim results referenced in the May 2007 Release.

B

.

The District Court granted d efendants ’ first motion to dismiss on February 10, 2012, holding the Funds had not adequately alleged d efendants made any materially false or misleading statements and d efendants had no duty to disclose allegedly omitted details. On December 21, 2012, the District Court gra nted the Funds leave to file a s econd a mended

c omplaint. On April 22, 2013, the District Court again dismissed the Funds’ claims, holding (1) the Funds failed to adequately allege d efendants made any affirmatively false or misleading statements , (2) d efendants had no duty to disclose
additional information ab out t he Phase 2 interim results, and (3) t he Funds failed to sufficiently plead a predicate Exchange Act violation required to maintain their control person liability and insider trading claims.

On appeal, the Funds contend the District Court erred
in dismis sing their section 10(b) and Rule 10b

- 5 claims for failure to adequately plead falsity. The Funds also argue
defendants ’ statements and actions triggered a duty to
disclose full and co mplete material information to investors
about the Phase 2 interim resu lts

. And the Funds challenge11 the District Court’s dismissal of their control person liabi lity and insider trading claims.

We review de novo the District Court’s decision to grant d efendants ’ Rule 12(b)(6) motion to dismiss. See In re Aetna, Inc. Sec. Li tig. , 617 F.3d 272, 277 (3d Cir. 2010). We also exercise plenary review over the dismissal of a compla int for failure to satisfy the heightened pleading standards of the
P SLRA and over the District Court’s interpretation of federal
securities laws. Insti tutional Investors Grp. v. Avaya, Inc.

, 564 F.3d 242, 251 (3d Cir. 2009). The PSLRA’s heightened pleading standards require a private securities fraud complaint alleging false or misleading statements to “specify each statement alleged to have been mislea ding

, the reason or reasons why the statement is misleading , and, if an allegation

. . . is made on information and belief,

. . . state with particularity all facts on which that belief is formed. ” 15 U.S.C. § 78u

- 4(b) (1) ; see Tellabs, Inc. v. Makor Issue s & Rights, Ltd. , 551 U.S. 308, 321 (2007)

. “This standard requires plaintiffs to plead the who, what, when, where, and how: the first paragraph of any newspaper story.” Institutional Investors Grp. , 564 F.3d at 253 (internal quotation marks and citatio n omitted). A complaint must also “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)(2); Tellabs , 551 U.S. at 321

. We must
evaluate “ the complaint in its enti rety, as well as other

sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss,” including documents incorporated into the complaint by reference and matters of which we may take judicial notice. Tellabs , 551 U.S. at 322 (citatio n omitted).12 C.

T his is not the first case in which the federal courts
have adjudicated securities fraud allegations arising out the development of bapineuzumab. Three federal courts have
considered a nd dismissed claims similar to those at issue in
this ca se. See Kleinman v. Elan Corp., plc , 706 F.3d 145 (2d Cir. 2013); In re Elan Corp. Sec. Litig. , No. 08

- cv

- 8761 (S.D.N.Y. June 23, 2011); Philco Inv s ., Ltd. v. Martin , No.
10

- 02785, 2011 WL 50 0694 (N.D. Cal. Feb. 9, 2010).

In Kleinman , the Second Circuit affirmed the Rule 12(b)(6) dismissal of a suit against Elan

, Pfizer, and two Elan executives for failure to allege any actionable false statements
or omissions and failure to plead a predicate Exchange Act
violation. Kleinman , 706 F.3d at 147. The plaint iff in
Kleinman allege d the June 2008 Release misrepresented the Phase 2 results as “[e]ncouraging ” and omitted key information about the lack of a dose response and analysis of
the Phase 2 data. But t he Second Circuit rejected those
contention s , holding t he June 2008 Release clearly stated the “[e]ncouraging” results were subgroup results and finding words like “encouraging” to be puffery. Id. at 153. And the
court found the omitted information claim was not actionable because, although possibly of inte rest to a reasonable investor, its omission did not render the June 2008 Release false or misleading

. Id. at 154

– 55.

In In re Elan , a district court dismissed claims against Elan for failure to allege any actionable false statements or
omissions. The ca se challenged many of the same statements at issue in this case, including the May 2007 Release. The court rejected the allegation that the May 2007 Release was13 false based on Ruffolo’s “spectacular” statement. Transcript of Argument at 10:9

– 13, In re El an , Corp. Sec. Litig.

, No. 08

-

cv

- 8761 (“There’s nothing about [the May 2007 Release] that says it’s going to be spectacular. Everyone knows that in
this business it’s extraordinarily risky and

. . . expensive, and lots of drugs have been stopped in phase 3, even though they had high hopes in phase 2.”). The court described Ruffolo ’s “spectacular” statement as “puffery” and noted that the law does not provide that “an early puffery, if not corrected, continues to be a false statement every day of the year that
follows.” Id. at 15 :20

– 23. And the court said Elan and Wyeth would not have agreed to proceed to Phase 3, given
the millions of dollars the companies spent , unless Phase 2 showed at least some promising data. Id. at 18:5

– 19.

Finally, in Philco In vestments , a district court dismissed claims against Elan and three of its executives for failure to adequately allege falsity and to plead a predicate Exchange Act violation. Philco Inv s

. , 2011 WL 500694, at *1. Plaintiffs challenge d both the May 2007 R elease and the June 2008 Release. The court found plaintiffs failed to allege Elan disclosed criteria by which it would judge the Phase 2 interim results, and, accordingly, plaintiffs failed to adequately allege the May 2007 Release was false. Id. at *6

– 7. The cou rt also concluded plaintiffs failed to allege the June 2008 Release was false because, although it may not
have included all the information a reasonable investor would have liked to have, it did not contain false or misleading
information. Id. at * 7

– 9.

II

.

Section 10(b) of the Exchange Act prohibits the “use14 or employ [ment] , in connection with the purchase or sale of any security

. . . [

, of] any manipulative or deceptive device or contrivance in contravention of such rules and regulations as
the [SEC] may prescribe .” 15 U.S.C. § 78j(b). SEC Rule
10b

- 5 implements this provision by making it unlawful to, among other things, “make any untrue statement of a material fact or to omit to state a material fact necessary in order to
make the statemen ts made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b

- 5(b). The Supreme Court has implied a private cause of action from the text and purpose of section 10(b). Matrixx Initiatives, Inc. v. Siracusano , 131 S. Ct. 1309, 1317 (2011).

To state a claim for securities fraud, plaintiff s must allege (1) a material misrepresentation or omissio n , (2) s cienter, (3) a connection between the misrepresentation or omission and the purc hase or sale of a security, (4 ) r eliance upon the misrepresentation or omission, (5) economic loss, and (6) loss causation. Id. at 1317

– 18 ; In re Aetna, Inc. Sec. Litig. , 617 F.3d 272, 277 (3d Cir. 2010)

.

The primary issue in this appeal is the first element,
whether the Funds have a dequately alleged d efendants made a material misrepresentation or omission. The District Court
concluded the Funds had failed to do so

. But t he F unds
contend th at conclusion was incorrect because the May 2007 Release contained affirmatively false and mis leading
statements about the Phase 2 interim results

, and defendants’ post

- May 21 statem ents were also false or misleading. We agree with the District Court.15 A.

We first analyze whether the May 20 07 Release
contained any affirmative false statements

, and then we consider whether the May 2007 Release was misleading in light of defendant Ruffolo’s October 2006 “spectacular ”

statement.

1.

Specifically, the Funds allege one statement in the May 2007 Release was affirmatively false

— the deci sion to
initiate the Phase 3 trial “was based on the seriousness of the disease and the totality of what the companies have learned from their immunotherapy programs, including a scheduled Interim look at data from an ongoing Phase 2 study, which
remains blinded.” This state ment was affirmatively false, the Funds contend, because Wyeth’s decision to move to Phase 3
was not “based on” the Phase 2 interim results

— it was made in spite of those results , which the Funds characterize as abysmal . Because their confidential witness statements demonstrate bapineuzumab failed the interim review, the Funds argue the Phase 2 interim results did not support
d efendants ’ decision to initiate Phase 3. 11

11 We apply the PSLRA’s heightened pleading requirements
to confidential wi tness allegations “by evaluating ‘the detail provided by the confidential sources, the sources’ basis of knowledge, the reliability of the sources, the corroborative nature of other facts alleged, including from other sources, the coherence and plausibilit y of the allegations, and similar
indicia.’” Institutional Investors Grp. , 564 F.3d at 26316 We agree with th e District Court , however, that the Funds’ allegations are insufficient to maintain a plausible claim of falsity regarding the May 2007 Release statement under the “[e]xacting pleading requirements” of the PSLRA

. See Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 313 (2007) ; Institutional Investors Grp. v. Avaya, I nc. , 564 F.3d 242, 263 (3d Cir. 2009) (“The PSLRA imposes a particularity requirement on all allegations, whether they are offered in support of a statement’s falsity or of a defendant’s scienter.” (citation omitted))

.

T he Funds’ own pleading demonstrates the accuracy of
d efendants ’ statement that the initiation of Phase 3 was based in part on the Phase 2 interim results

. See Cal. Pub. Emps. ’ Ret. Sys. v. Chubb Corp. , 394 F.3d 126, 156

– 58 (3d Cir. 2004) (finding plaintiffs failed to adequately plead falsi ty where information provided by their confidential witnesses

was generally consistent with d efendants ’ allegedly false and misleading public statements). Analyzing the phrase “based on” in the May 2007 Release under the PSLRA’s heightened pleading standa rds, t he Funds have failed “to specify

. . . the reason or reasons why the statement is misleading” because
the mo st cogent interpretation of that phrase is that d efendants
considered the Phase 2 interim results as one factor in their
deci sion to initiate the Phase 3 trial

. See Tellabs , 551 U.S. at
322. The Funds’ confidential witness statements indicate
d efendants did analyze and consider those r esults in deciding
whether to initiate Phase 3.

Moreover, the Funds’ argument that the May 2007

(quoting Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp. , 394 F.3d 126, 147 (3d Cir. 2004)).17 Release false ly conveyed that the Phase 2 interim results justified the initiation of Phase 3 fails because it is based on a selective reading of that document. See id. (instructing courts to consider complaints unde r the PSLRA in their entirety, including documents i ncorporated by reference). The May 2007 Release made no statement about the strength of the
interim results

. Instead, t he M ay 2007 Release provided three
base s for the move to Phase 3: (1) the seriousn ess of Alzheimer’s disease, (2) the totality of what the companies
learned from their immunotherapy programs, and (3) the
Phase 2 interim results. A full reading of the May 2007
Release under the PSLRA’s heightened pleading requirements, therefore , bolsters the District Court’s
conclusion that it contained no false statements. See i d. ; In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1426 (3d Cir. 1997) (noting we are to examine statements in the full context of the documents of which they are part). Most importantly, the May 2007 Release explici tly cautioned investors that “[n]o conclusion” could be drawn about the
Phase 2 interim results until the completion of Phase 2.

A comparison with the Second Circuit’s decision in
Kleinman is instructive. In that case, plaintiff challenged allegedly fals e statements in the June 2008 Release. The June 2008 Release, unlike the May 2007 Release, did make
affirmative characterizations about the Phase 2 results

— it described the Phase 2 results as supportive of the decision to
initiate Phase 3 because of the “ statistically significant and clinically meaning ful benefits ” shown for the ApoE4 non

carrier subgroup. But the Second Circuit concluded plaintiff had not alleged anything in the June 2008 Release was literally false because the references to “[e]ncouragi ng” results could not have meant anything other than the positive18 subgroup results

. Kleinman v. Elan Corp., plc , 706 F.3d 145,
153 (2d Cir. 2013)

. Moreover, the Second Circuit held expressions such as “encouraging” constituted puffery

. Id

. Because the May 2007 Release offers no affirmative characterization of the Phase 2 interim results, Kleinman supports defendants’ position that the May 2007 Release was not affirmatively false.

Even reading the May 2007 Release as conveying the message that the inter im results supported the move to Phase
3 and assuming the truth of the Funds’ confidential witness allegations, the Fun ds ’ allegations still fail to establish that
d efendants ’ May 2007 Release statement was affirmatively
false. See Institutional Investors Grp. , 564 F.3d at 263 n.33 (noting that confidential witness allegations may be found adequately particularized under the PSLRA but may still “fail
either to establish the falsity of a statement, or to give rise to a strong inference of scienter”). The F unds’ confidential
witnesses allege bapineuzumab failed the interim review because it did not achieve pre

- defined p

- values 12 Wyeth used to assess the statistical significance of bapineuzumab versus a placebo under the ADAS

- cog and DAD tests. Specifically, CW2 alleges that unless the Phase 2 interim review met these specified p

- values, Wyeth and Elan had agreed they would not proceed to Phase 3 based on the interim review. CW1 contends the Phase 2 interim results did not reveal any statistically significant difference between bapineuzumab

treated patients and placebo

- treated patients with respect to

12 A p

- value, or probability value, is a measure of statistical significance. Relevant to the Funds’ allegations, the companies did not disclose that achievement of any particular

p

- values were necessary to initiate a Phase 3 trial.19 any of the pre

- specified efficacy endpoints measured by the
ADAS

- cog and DAD tests. Nor did bapineuzumab show any “dose response,” meaning higher doses of the d rug were not associated with better results. Furthermore, the Phase 2 interim results showed serious safety concerns with bapineuzumab, including numerous side effects and three deaths (compared to no deaths in patients treated with placebo).

But t he Fun ds point to no public disclosure by
defendants of the specific p

- values ba pineuzumab was expected to achieve under the ADAS

- cog and DAD tests, no public statements regarding a “dose response” or whether one would be expected, see Kleinman , 706 F.3d at 153

– 54, and no public comments about the safety metrics , including anticipated side effects , through which bapineuzumab would
be evaluated . Because defendants never told investors bapineuzumab would only pass the interim review if specific

p

- values, dose resp onses, or safety metrics were achieved, the Funds’ confidential witness allegations fail to establish with sufficient specificity that the challenged May 2007 Release

statement

— that the decision to initiate Phase 3 was based in part on the Phase 2 interim review

— was false.

Moreover, CW1 noted that the results showed “circumstantial evidence of efficacy” for an important patient subgroup

— non

- carriers of the ApoE4 gene

— consisting of approximately 40 to 70 percent of Alzheimer’s patients.
CW1 also stated tha t one of his superiors was upset about the decision to initiate Phase 3 testing and that the subgroup results justified further investigation through a Phase 2 “exploratory” trial, not a large scale Phase 3 “confirmatory”
trial.20 T hese allegations show a di fference of opinion within Wyeth about whether the Phase 2 interim results

— together with the seriousness of Alzheimer’s disease and the totality of what the companies had learned from their immunotherapy

programs

— justified initiating a Phase 3 trial. Inte rpretations
of clinical trial data are considered opinions. S ee Kleinman

, 706 F.3d at 153; In re Adolor Corp. Sec. Litig. , 616 F. Supp. 2d 551, 567 (E.D. Pa. 2009) . Opinions are only actionable under the securities laws if they are not honestly believed and
lack a reasonable basis. In re Merck & Co. , Inc. Sec., Derivative & “ERISA” Litig. , 543 F.3d 150, 166 (3d Cir. 2008); Kleinman , 7 06 F.3d at 153

.

The Funds have failed to adequately allege d efendants did not honestly believe their interpretation of th e interim
results or that it lacked a reasonable basis. A company’s failure to accurately disclose clinical trial data may be actionable under the securities laws, but the cases the Funds cite are distinguishable because they involve plausible allegations of affirmative false statements about a drug’s efficacy and safety. See, e.g.

, In re Viropharma, Inc. Sec. Litig. , No 02

- 1627, 2003 WL 1824914, at *6, *9 (E.D. Pa. Apr. 7, 2003); In re Transkaryotic Therapies, Inc. Sec. Litig.

, 319 F. Supp. 2d 152, 160 ( D. Mass. 2004). In contrast, the May 2007 Release contains no affirmative statemen t about bapineuzumab’s efficacy or safety

. Moreover, t he initiation
of Phase 3 cost millions of dollars and required FDA approval, rendering it improbable that d efendants w ould have
continued if they did not believe their interpretation of the
interim results or if they thought the drug a complete failure

. See Kleinman , 706 F.3d at 153

.

Moreover, because the Phase 2 interim results showed21 “circumstantial evidence of effica cy” for one important patient subgroup, the disagreement of some Wyeth employees with the company’s interpre tation of the interim results is not
sufficient to show defendants’ interpretation lacked a
reasonable basis. The Funds present three pieces of evi dence showing disagreement among Wyeth’s employees about the
decision to initiate Phase 3. CW2 note d that after presentation of the Phase 2 interim results to the company’s
four

- member Elan Alliance Committee and approximately
100

- member R&D Committee , he and two other members of
the R&D Committee “express ed skepticism” at the decision to proceed with Phase 3 based on the interim results

. CW1
revealed that one of his superiors was upset Wyeth decided to proceed , at Ruffolo’s urging, with a “massive” Phase 3 study.
And CW1 noted his own belief that Wyeth should have
conducted another Phase 2 study to investigate the subgroup
results , not a Phase 3 trial. But the disagreement of five employees within a large pharmaceutical company about the interpretation of clinical trial data and the critical strategic decision of initiating an expensive Phase 3 trial does not
render defendants’ decisions unreasonable or their statements
false

. See Kleinman , 706 F.3d at 153 (finding no basis for inferring defendants did not honestly believe their statements because the initiation of Phase 3 could only be made “after there have been positive Phase 2 results sufficient to satisfy both business and regulatory interests”); In re Adolor , 616 F. Supp. 2d at 567 (holding disagre ements about the proper methodology and conduct of clinical studies are insufficient to establish falsity)

. At bottom , the Funds fail to plead
sufficient facts to show d efendants did not honestly believe initiating Phase 3 was appropriate or that defe nd an ts lacked a
reasonable basis for that decision.22 2.

We next evaluate whether the District Court correctly
determined that the May 2007 Release was not misleading in light of d efendants’ prior statements. The Funds contend the May 2007 Release was misleadin g because defendant Ruffolo had assured investors in October 2006 that Wyeth would not
commence Phase 3 early unless the Phase 2 interim results were “spectacular” in meeting specific efficacy criteria. 13 By telling investors they were moving to Phase 3 ea rly based in part on the Phase 2 interim results, the Funds contend
d efendants misled the market by failing to disclose those poor results, leaving the impression they must have been “spectacular” or at least positive. The Funds argue t his
f

ailure to disc lose in fact misled the market, and they cit e statements by stock analysts and point to the increase in Wyeth’s stock price following issuance of the May 2007
Release.

We agree with the District Court that d efendants ’ statements, taken in context, were no t misleading. T he May
2007 Release did not characterize or discuss the strength of
the Phase 2 interim results. It only listed those results as on e factor among three in the decision to initiate Phase 3 , and i t expressly cautioned investors not to draw c onclusions about the Phase 2 study until its completion. The Funds’ attempt to
differentiate between conclusion s regarding the interim and
final results is unavailing in light of the May 2007 Release’s

13 Pre

- class period statements may be used to ascertain the falsity and materiality of the challenged statements. In re Merck & Co., Inc. Sec. Litig. , 432 F.3d 261, 272 (3d Cir. 2005).23 plain language . Defendants ’ explicit caution against drawing
conclusion s about the “Phase 2 study” by definition include s the interim results

, which were p art of the Phase 2 study

.

T he Funds also appear to misread Ruffolo’s October 2006 statement. They interpret it to mean Wyeth would not

commence Phase 3 early unless the Phase 2 interim results were “spectacular” in meeting specific efficacy criteria. But
Ruffolo’s statement was more narrow. He noted the companies “could advance directly into Phase III in the first half of 2007” if the results were “spe ctacular” or could complete the study and then move to the next interim look in
the first half of 2007. As d efendants correctly point out, the course of events Ruffolo envisioned in the “spectacular” scenario did not come to pass

— t he companies did not
adv ance to Phase 3 in the first half of 2007

. Instead, the May
2007 Release announced the initiation of Phase 3 in the second half of 2007 . Accordingly, the May 2007 Release should have superseded any lingering impression left by th e “spectacular” statement in the minds of reasonable investors. See United States v. Schiff , 602 F.3d 152, 170 (3d Cir. 2010); Oran v. Stafford , 226 F.3d 275, 286 (3d Cir. 2000).

Bolstering our conclusion is the nature of Ruffolo’s prior statement. Ruffolo’s 2006 “spectacular” statement was

a forward

- looking statement about a course of events that, as it turned out, did not come to pass. By using the conditional “could,” Ruffolo did not bind the company to any particular
course of action

. Nor could he

, because at the time he s poke
initiation of Phase 3 still required FDA approval. Moreover, the adjective “spectacular” is the kind of “ vague and general statement[] of optimism” that “constitute[s] no more than puffery and [is] understood by reasonable investors as such.”24 In re Advanta Corp. Sec. Litig. , 180 F.3d 525, 538 (3d Cir. 1999), abrogated on other grounds by Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308 (2007), as recognized in Institutional Investors Grp. v. Avaya, Inc. , 5 64 F.3d 242, 276 (3d Cir. 2009) ; se e also Transcript of Argument at 15, In re Elan Corp. Sec. Litig. , No. 08

- cv

- 8761 (S.D.N.Y. June 23, 2011) ; Philco Inv s ., Ltd. v. Martin , No. 10

- 02785, 2011 WL 500694, at *6 (N.D. Cal. Feb. 9, 2011). Furthermore, although the May 2007 Release did not offe r any specific characterization of the Phase 2 interim results, it did caution
that no conclusion could be drawn about the Phase 2 data until the completion of the study. Had the interim results been “spectacular,” it is reasonable to assume the companies would have trumpeted that fact in the May 2007 Release

— or at least g iven some indication the data were positive.

Moreover, Ruffolo never said bapineuzumab was required to meet specific efficacy criteria to advance to Phase
3

. T h at remark was made by Ela n ’s CEO at a January 9,
2007

, healthcare conference. Defendants cannot be held responsible for statements they did not make. See Schiff , 602
F. 3d at 168, 170

– 71. A lthough the Funds’ confidential
witnesses stated that bapineuzumab was required (and faile d) to achieve certain p

- values in Phase 2 and showed no dose response and numerous safety concerns, the Funds fail to allege any public statements by d efendants regarding specific

p

- value s , dose responses, or safety metrics bapineuzumab would be expected t o achieve in order to advance to Phase 3

.

Accordingly, we conclude the District Court correctly determined the Funds failed to adequately allege d efendants
made an y affirmatively false or misleading statement s in the May 2007 Release.25 B.

The Funds also co ntend defendants made six false or misleading public statements following issuance of the May 2007 Release. The Funds allege the se statements failed to
disclos e the efficacy and safety problem s revealed in the Phase 2 study, as well as that the Phase 2 in terim re sults showed bapineuzumab did no t meet pre

- established criteria and Phase 2 testing was near ly a complete failure. We concur with the District Court and reject these allegations

.

The Funds first challenge defendant Ruffolo’s May 22, 2007, remarks at the Citigroup H ealthcare C onference . When
asked to discuss wh ich aspects of the Phase 2 interim review justified the early initiation of the Phase 3 trial, Ruffolo said
he “cannot comment and will not comment on the Interim
look” because he “cannot do anything to destroy the blind in that study.” Because Ruffolo only referred attendees to the May 2007 Release and refused to comment on how the interim review justified the initiation of Phase 3, he made no false or misleading statement.

Next, the Funds contend statements made by Wyeth investor relations representative Justin Victoria and defendant
Poussot during earnings calls on July 19, 2007, and April 22, 2008, that described the Phase 2 interim results as one factor in the “composite decision” to mo ve to Phase 3 were false
and misleading. But t hose statements are consistent with the May 2007 Release and accurately convey that the interim
results were one factor d efendants considered in deciding to
initiate Phase 3. Moreover, Victoria conf i rmed to i nvestors and analysts on the April 22 , 2008, call that Wyeth had n ot yet disclosed the strength of the Phase 2 results and needed to26 complete the analysis of the Phase 2 data to make that
determination

. As a result, we find the July 19 and April 22

statem ents were not false or misleading.

The Funds also challenge statements made by Wyeth
executives Dr. Joseph Camardo and Joseph M. Mahady. At
the January 8, 2008, J.P. Morgan Healthcare Conference,
Camardo described bapineuzu m a b as a potential “breakthroug h” drug for Alzheimer’s

, and at the March 19, 2008, Lehman Brothers Global Healthcare Conference Mahady mention ed bapineuzumab as an example of a drug offering “opportunities f o r transformation al growth of the company.” But these statements are not action able because they are vague, no n

- specific, and forward

- looking. See In re
Advanta , 180 F.3d at 538; Philco Inv s

. , 2011 WL 500694, at *6. Both speakers were also cautious

— Camardo noted the companies still faced risks establishing bapineuzumab’s efficacy a nd safety, and Mahady reminded the audience that the final results of the Phase 2 study were not yet available. Furthermore, Camardo’s statement that Wyeth and Elan
“learned a lot in Phase II” is true based on the statements from the Funds’ own confidenti al witness es

. Accordingly,
the Funds ’ allegations that these statements were false or misleading lack merit

.

Finally, the Funds allege defendant Poussot’s

statement s on Wyeth’s July 23, 2008, 8

- K and earnings call

were false and misleading because he des cribed the Phase 2 results as “encouraging and supportive of our prior decision
to initiate Phase 3

. ” Unlike the other post

- May 21 statements,
Poussot did characte rize the final Phase 2 results as positive. But he only repeated conclusions Wyeth had disc losed six days before in the June 2008 Release. The District Court held27 the June 2008 Rele ase was not actionable because d efendants were under no duty to disclose information the Funds alleged was omitted from that document, and the Funds do not challenge that determination on appeal. Accordingly, we
concur with the District Court that because the June 2008 Release is not false or misleading, Poussot’s statement s cannot b e the basis of liability here.

Based on the foregoing analysis, we hold the District Court correctly determined the Funds failed to sufficiently allege d efendants ’ post

- May 21 statements were false or misleading.

I II

.

In addition to alleging d efendants ’ statements were affirmatively false or misleading, the Funds contend those

statement s triggered a duty to disclose full and complete material information regarding the Phase 2 interim results. A duty to disclose under federal securities laws may arise when a statute requires disclosure, insider trading occurs , or there is

an inaccurate, incomplete, or misleading prior disclosure. Oran v. Stafford , 226 F.3d 275, 285

– 86 (3d Cir. 2000) . The Funds urge us to impose a duty to disclose on each of these grounds because (1) d efendants chose to speak about a material subject to investors, (2) d e fendants Ruffolo and
Martin allegedly engaged in insider trading, and (3) disclosure was necessary to make d efendants ’ prior statements not misleading. W e agree with the District Court
that d efendants were under no duty to disclose the allegedly
omitted i nformation.28 A.

The Funds first argue d efendants had a duty to speak fully and truthfully about the Phase 2 interim results because they put the subject “in play” by disc ussing those results publicly. Instead of concealing material information about
th e po or Phase 2 interim results, the Funds allege d efendants

s hould have either disclosed those poor results or admitted they had changed their criteria for initiating the Phase 3 trial.

Section 10(b) and Rule 10b

- 5 “do not create an affirmative duty to discl ose any and all material information.” Matrixx Initiatives, Inc. v. Siracusano , 131 S. Ct. 1309, 1321 (2011)

. “ Disclosure is required

. . . only when necessary ‘to
make

. . . statements made, in the light of the circumstances under which they were made, no t misleading.’” Id. (quoting 17 C.F.R. § 240.10b

- 5(b)). “Silence, absent a duty to disclose, is not misleading under Rule 10b

- 5.” Basic Inc. v.
Levinson , 485 U.S. 224, 239 n.17 (1988). “[C]ompanies can control what they have to disclose under these p rovisions by controlling what they say to the market.” Matrixx , 131 S. Ct.
at 1322.

T he May 2007 Release made no affirmative statement
about the strength of the Phase 2 inter im results n or characterized those results in any manner. See Oran , 226
F.3d at 285 ( finding no material misrepresentation or omission where defendants did not make any “affirmative characterization” that FDA approval was based on a complete review of all relevant medical information as alleged by plaintiffs). Accordingly, Wyeth did not place the strength or
nature of the Phase 2 interim results “in play,” so it was under no duty to provide additional details about those results.29 Wyeth was also not obligated to di sclose whether it ha d changed its criteria for initiating Phase 3 , sin ce that fact was likewise not “in play

. ” Significantly, Wyeth never disclosed that particular p

- values would have to be met in order to
commence Phase 3. Nor did it ever reveal th e specific
rationale or formula it was using to decide whether to initiate
Phase 3.

T he Funds’ attempt to analogize this case to Matrixx is unavailing. In Matrixx , the Supreme Court evaluated whether a drug company’s failure to disclose reports of a possible link between its product and anosmia, the loss of the sense of
smell

, rendered the company’s statements relating to revenues and product safety misleading. Matrixx , 131 S. Ct. at 1313

– 14. The company stated, among other t hings, that reports linking its product to anosmia were “completely unfounded and misleading” and that the safety and efficacy of the drug

w ere well established. Id. at 1323. The evidence showed,
howeve r, that the company had documentation of a biological link between the drug and anosmia and had conducted n o studies of its own to disprove that connection

. Id. In finding the company’s actions rendered its statements misleading, the Court determined it was substantially likely a reasonable investor would regard the omitted information as material.
Id.

Here, by contrast, the central issue is whether the Funds have adequately alleged falsity, not materiality. And,
unlike Matrixx , the challenged statements in this case do not
characterize or make affirmative claims about the Phase 2 interim results. The May 2007 Release noted only that Wyeth
and Elan deci ded to initiate the Phase 3 trial “based on the seriousness of the disease and the totality of what the30 companies have learned from their immunotherapy programs, including a scheduled Interim look at data from an ongoing Phase 2 study, which remains blinde d.” Subsequent

statements only reiter ated the May 2007 Release statement

, discussed bapineuzumab’s potential to be a “breakthrough” drug for Alzheimer’s, and noted bapineuzumab as an example of a drug offering “opportunities for transformational growth”

o f Wyeth. No ne of these statements characterize d or ma d e affirmative claims about the Phase 2 interim results. 14

Accordingly, Matrixx is inapposite to this case, and
defendants did not have a duty to disclose additional
information because they mentioned t he Phase 2 interim
results as one factor in their decision to initiate Phase 3.

B.

The Funds next argue defendants were under a duty to
disclose because defendants Ruffolo and Martin allegedly engaged in insider trading. 15 “[A] corporate insider must

14 Defendant Poussot’s July 23, 2008, statement describing the Phase 2 results as “encouraging and supportive” of the
decision to initiate Phase 3 did characterize the fina l Phase 2 results. But, as noted previously, this statement only repeated conclusions Wyeth had previously disclosed in the June 2008 Release, which the District Court fo und was not actionable

— a determination the Fu nds do not challenge on appeal.

15 Specif ically, the Funds contend that on May 22, 2007, Ruffolo exercised options and sold 130,436 Wyeth shares at $58.33 per share, for a net gain of approximately $2.36 million. The same day, Martin sold 200,500 shares at $57.97 per share, for a net gain of app roximately $283,000. By May31 abst ain from trading in the shares of his corporation unless he
has first disclosed all material information known to him.”
Chiarella v. United States , 445 U.S. 222, 227 (1980); Deutschman v. Beneficial Corp. , 841 F.2d 502, 506 (3d Cir. 1988). The Funds ’ the ory is Ruffolo and Martin knew the negative Phase 2 interim results, concealed them from investors, and reaped the benefit of that concealment by trading on Wyeth’s artificially inflated stock.

But the Funds have failed to adequately plead an
insider trad ing violation under section 20A of the Exchange Act because they have failed to adequately plead a predicate section 10(b) violation. See In re Advanta Corp. Sec. Litig.

, 180 F.3d 525, 541 (3d Cir. 1999), abrogated on other grounds by Tellabs, Inc. v. Mak or Issues & Rights, Ltd. , 551 U.S. 308 (2007), as recognized in Institutional Investors Grp.

v. Avaya, Inc. , 564 F.3d 242, 276 (3d Cir. 2009)

. Section 20A, which provides an express private cause of action for insider trading against contemporaneous trade rs, requires the alleged insider trader to have committed an independent
violation of the Exchange Act or SEC rul es and regulations promulgated under that law . 15 U.S.C. § 78t

- 1 (a). The Funds have not adequately alleged that Martin and Ruffolo
committed such an independent violation.

Nor are the Funds ’ insider trading allegations sufficient to meet the heightened pleading standards for
scienter under the PSLRA. The PSLRA requires the Funds to allege facts giving rise to a “strong inference ” of scienter,
which “must be more than merely plausible or reasonable

— it

22, 2007, Martin had exercised every profitable option
available to him.32 must be cogent and at least as compelling as any opposing
inference of nonfraudulent intent.” Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 314 (2007). The mere
fact that Martin an d Ruffolo sold stock is insufficient to
establish scienter. See In re Alpharma Inc. Sec. Litig. , 372 F.3d 137, 152 (3d Cir. 2004), abrogated on other grounds by Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308 (2007), as recognized in Belmont v. MB Inv. Partners, Inc.

, 708 F.3d 470, 484 (3d Cir. 2012).

For these reasons

, there is no duty to di sclose based on alleged insider trading.

C.

T he Funds also allege d efendants had an ongoing duty to disclose throughout the Class Period each time they sp oke
about the Phase 2 interim results or the decision to initiate the
Phase 3 trial to avoid misleading disclosures

. See Oran , 226
F.3d at 285

– 86. The Funds contend because d efendants previously told the market the interim results would need to be “spect acular” to justify early initiation of Phase 3,
d efendants had an ongoing duty to disclose that the interim results were not supp ortive of the move to Phase 3. We conclude the District Court properly refused to find
defendants had a n ongoing duty to discl ose

.

As noted above, the course of events outlined in
Ruffolo’s October 2006 “spectacular” statement did not come to pass . The companies only advanced to Phase 3 in the second half of 2007, not in the first half of 2007 as Ruffolo had said they might if the interim results proved to be “spectacular

. ” Accordingly, d efendants had no duty to update33 th e “spectacular” statement. See United States v. Schiff , 602 F.3d 152, 170 (3d Cir. 2010) ; Oran , 226 F.3d at 286. Moreover, w e have held that a duty to update applies only in “narrow circumstances” involving more fundamental corporate changes s uch as mergers, takeovers, or liquidations, as well as when subsequent events produce an “extreme” or “radical change” in the continuing validity of the original

statemen t. See Schiff , 602 F.3d at 170 (citing In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1433

– 34 (3d Cir. 1997)). Those elements are not present here. Furthermore

, there is no duty to update vague and general statements such as “spectacular.” S ee In re Advanta , 180 F.3d at 538 (“[V]ague and general statements of optimism constitute no more than puffery and are understood by reasonable investors as such.” (internal quotation marks and citations omitted) ) ; Philco Inv s ., Ltd. v. Martin , No. 10

- 0278 5, 2011 WL 500694, at *6 (N.D. Cal. Feb. 9, 2011)

.

E ven if we determined d efendants had a duty to update the October 2006 “spectacular” statement, the May 2007 Release would have cut off any such duty. Its explicit caution
that investors should draw no c onclusion about the Phase 2
interim results tempered any impression made by the “spectacular” statement. Had the Phase 2 interim results been spectacular, it is reasonable to assume Wyeth w ould have trumpeted that fact.

Accordingly, defendants were under no duty to disclose the allegedly omitted information

.

I V.

The Funds also appeal the District Court’s dismissal of34 their control person liability and insider trading claims. W e conclude the Distri ct Court correctly dismissed those claims
f

or failure to adequately plead a predicate Exchange Act
violation.

Section 20(a) of the Exchange Act creates a cause of action against individuals who exercise control over a “controlled person,” including a corporation, who has committed a section 10(b) violation. 15 U.S.C. § 78t(a); see also Institutional Investors Grp. v. Avaya, Inc. , 564 F.3d 242, 252 (3d Cir. 2009) . Because the Funds have failed to adequately plead a predicate section 10(b) violat ion, their
section 20(a) claim must be dismissed. See Rahman v. Ki d Brands, Inc. , 736 F.3d 237, 247 (3d Cir. 2013) (citing Institutional Investors Grp. , 564 F.3d at 252).

Similarly, section 20A of the Exchange Act provides that a corporate insider who trades stock “while in possession of material, nonpublic information” is liable to any person who traded contemporaneously with the insider, provided there is an independent Exchange Act violation. 15 U.S.C. §
78t

- 1(a). Because the Funds have failed to adequately plead a predicate Exchange Act violation, their section 20A claim
must also be dismissed. See In re Advanta , 180 F.3d at 541 (citations omitted); In re Cendant Corp. Litig. , 60 F. Supp. 2d 354, 3 7 8 (D.N.J. 1999). 16

16 The Funds also allege the District Court erred in relying on two other bases to dismiss their section 10(b) claims

— the May 2007 Release’s use of caution ary language and the District Court’s purported finding that the May 2007 Release
statement was immaterial. The Funds contend the District Court misapplied either the PSLRA Safe Harbor provision , 1535 V

.

For the foregoing reasons, we will affirm the judgment of the District Court granting d efendants ’ Rule 12(b)(6)
motion to dismiss.

U.S.C. § 78u

- 5(c), or the “bespeaks caution” doctrine

, EP Medsystems, Inc. v. EchoCath, Inc. , 235 F.3d 865, 873 (3d Cir. 2010)

, in finding the May 2007 Release statement to be
cautious. But the District Court applied neither doctrine and only invoked defendants’ use of cautionary language in analyzing whether the plain language of the May 2007 Release was false or misleading. Nor did the District Court make any findings on materiality

— the court based its ruling on the Funds’ failure to plead falsity, not on the materiality of
the statements. Accordingly, the Funds’ contentions the District Court erred in relying on the May 2007 Release’s cautionary language and in making materiality determinations
lack merit.