United States Court of Appeals 

For the First Circuit 

No. 15-1491 

IN RE: ARIAD PHARMACEUTICALS, INC. SECURITIES LITIGATION 

JOSEPH BRADLEY; PENSION TRUST FUND FOR OPERATING ENGINEERS; CITY 

OF FORT LAUDERDALE POLICE & FIRE RETIREMENT SYSTEM; AUTOMOTIVE 

INDUSTRIES PENSION TRUST FUND; WILLIAM A. GAUL, D.M.D., 

Plaintiffs, Appellants, 

NABIL ELMACHTOUB, individually and on behalf of all others 

similarly situated; JAMES L. BURCH, individually and on behalf 

of all others similarly situated; GREATER PENNSYLVANIA 

CARPENTERS' PENSION FUND, individually and on behalf of all 

others similarly situated; JIMMY WANG, individually and on 

behalf of all others similarly situated, 

Plaintiffs, 

v. 

ARIAD PHARMACEUTICALS, INC; HARVEY J. BERGER; FRANK G. HALUSKA; 

TIMOTHY P. CLACKSON; EDWARD M. FITZGERALD; JEFFERIES & COMPANY, 

INC.; WAYNE WILSON; JAY R. LAMARCHE; BMO CAPITAL MARKETS CORP.; 

ATHANASE LAVIDAS; COWEN AND COMPANY, LLC; RBC CAPITAL MARKETS, 

LLC; JP MORGAN SECURITIES LLC; LEERINK SWANN LLC; NORBERT G. 

RIEDEL; MASSIMO RADAELLI; ROBERT M. WHELAN, JR.; UBS SECURITIES 

LLC, 

Defendants, Appellees, 

DAVID E. I. PYOTT; MIKE R. BOWLIN; JOHN T. CARDIS; WESLEY W. 

VONSCHACK; ROBERT A. INGRAM; WILLIAM J. LINK; MICHAEL A. 

MUSSALLEM; BARBARA J. MCNEIL, 

Defendants. 
APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS 

[Hon. William G. Young, U.S. District Judge] 

Before 

Howard, Chief Judge, 

Souter, Associate Justice,*

Lipez, Circuit Judge. 

 John C. Browne, with whom Kristin Ann Meister, Bernstein 

Litowitz Berger & Grossmann, LLP, Ariana J. Tadler, Arvind Khurana, 

Melissa Ryan Clark, Milberg LLP, Johnathan Gardner, Carol 

Villegas, Labaton Sucharow LLP, Glen DeValerio, and Berman 

DeValerio were on brief, for appellants. 

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

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

and Popeo, P.C. were on brief, for appellees ARIAD Pharmaceuticals, 

Inc., Harvey J. Berger, Frank G. Haluska, Timothy P. Clackson, 

Edward M. Fitzgerald, Wayne Wilson, Jay R. Lamarche, Athanase 

Lavidas, Norbert G. Reidel, Massimo Radaelli, and Robert M. Whelan, 

Jr. 

 Brian E. Pastuszenski, with whom Mark Holland, Brian C. 

Devine, and Goodwin Procter LLP were on brief, for appellees 

Jefferies & Company, Inc., BMO Capital Markets Corp., Cowen and 

Company, LLC, RBC Capital Markets, LLC, JP Morgan Securities LLC, 

Leerink Swann LLC, and UBS Securities LLC. 

November 28, 2016 

 * Hon. David H. Souter, Associate Justice (Ret.) of the 

Supreme Court of the United States, sitting by designation. 
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HOWARD, Chief Judge. When a company's stock declines, 

a shareholder lawsuit often follows. This case is no exception. 

Following a drop in the share price of ARIAD Pharmaceuticals, Inc., 

investors filed suit against the company and four corporate 

officers (together "ARIAD"), alleging securities fraud in 

violation of Sections 10(b) and 20(a) of the Securities Exchange 

Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b) and 78t(a), as 

well as the Securities and Exchange Commission's ("SEC") Rule 10b5, 17 C.F.R. § 240.10b-5. The complaint also raised claims under 

Sections 11 and 15 of the Securities Act of 1933 ("Securities 

Act"), 15 U.S.C. §§ 77k and 77o, against ARIAD, its directors, and 

various underwriters involved in the company's January 2013 

offering of common stock. The district court stopped the 

litigation in its tracks by dismissing the complaint in its 

entirety. See In re ARIAD Pharm., Inc., 98 F. Supp. 3d 147 (D. 

Mass. 2015). The plaintiffs timely appealed. 

We affirm the district court's dismissal of the 

securities fraud counts, except with respect to one particular 

alleged misstatement for which we find the allegations set forth 

in the complaint sufficient to state a claim. We also affirm the 

disposition of the plaintiffs' claims under Sections 11 and 15, 

albeit on different grounds than those articulated by the district 

court. 
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I. Facts

Fairly read, the complaint alleges the following. ARIAD 

Pharmaceuticals, Inc. is a publicly traded company headquartered 

in Cambridge, Massachusetts. At all times relevant to this 

litigation, Defendant-Appellee Harvey Berger served as ARIAD's 

Chairman and Chief Executive Officer ("CEO"), Defendant-Appellee 

Edward Fitzgerald served as the company's Executive Vice President 

and Chief Financial Officer ("CFO"), Defendant-Appellee Frank 

Haluska served as its Senior Vice President and Chief Medical 

Officer, and Defendant-Appellee Timothy Clackson served as its 

President of Research and Development, Senior Vice President, and 

Chief Scientific Officer. 

In 2008, ARIAD embarked on the development of ponatinib,1 

a tyrosine kinase inhibitor ("TKI") designed to treat patients 

suffering from chronic myeloid leukemia ("CML"). As with any 

experimental drug, the development process entailed a series of 

clinical trials. See N.J. Carpenters Pension & Annuity Funds v. 

Biogen IDEC Inc., 537 F.3d 35, 39 (1st Cir. 2008) (discussing 

typical three-phase trial structure). The first trial, dubbed 

"PACE 1," was intended to determine the maximum tolerable dose 

("MTD") of ponatinib. After settling on 45mg as the MTD, ARIAD 

began a second trial, "PACE 2." The purpose of this follow-on 

 1 ARIAD markets and sells ponatinib under the moniker 

"Iclusig." 
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study was to determine the safety, efficacy, and durability of 

ponatinib, in order to support its limited approval for CML 

patients who are resistant to or intolerant of other TKI 

treatments. In November 2012, with PACE 2 on-going, ARIAD began 

to screen subjects for its third clinical trial, "EPIC," which was 

designed to compare ponatinib directly against the leading CML 

drug on the market, Gleevec.

In July 2012, ARIAD began the process of submitting a 

rolling application to the FDA for limited approval to market 

ponatinib. In conjunction with the application, ARIAD submitted 

a July 2012 Interim Report consisting of data from the on-going 

PACE 2 trial, with a cut-off date of July 23, 2012. The Center 

for Drug Evaluation and Research ("CDER"), located within the FDA, 

subsequently analyzed the data and issued a series of reports of 

its own (collectively the "CDER Report").

By October 2012, ARIAD and the FDA began corresponding 

in earnest about potential approval of ponatinib for limited 

applications. As part of this process, ARIAD submitted a proposed 

label. The FDA, however, rejected ARIAD's proposal, citing 

concerns about adverse cardiovascular events and dosage 

reductions. On December 14, 2012, after some additional back-andforth, ARIAD announced that the FDA had approved the marketing of 

ponatinib on a limited basis. It was not all good news, however, 

as the FDA required ARIAD to include a "black box" warning on 
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ponatinib's label about the risk of adverse cardiovascular events. 

Following disclosure of these developments, ARIAD's per share 

stock price fell from $23.88 to $18.93.

In the wake of the black box warning, ARIAD nevertheless 

continued to publicly project confidence in ponatinib. But more 

troubling news arose in October 2013. First, on October 9, ARIAD 

informed investors that, based on additional data from an August 

2013 Interim Report, it was pausing enrollment in all clinical 

studies of ponatinib due to increased instances of medical 

complications in the PACE 2 trial. Days later, on October 18, 

ARIAD issued a Form 8-K and accompanying press release indicating 

that it had agreed to halt the EPIC trial entirely. Finally, on 

October 31, ARIAD announced that it was "temporarily suspending 

the marketing and commercial distribution" of ponatinib at the 

direction of the FDA. The market reacted harshly, and ARIAD's 

stock price fell to $2.20 per share. The instant shareholder 

lawsuit followed. 

II. Procedural History

 On the defendants' motion, the district court dismissed 

the complaint in its entirety. As to the Exchange Act claims, the 

court found that the complaint sufficiently alleged material 

misrepresentations or omissions about ponatinib, but that it 

failed to give rise to a "strong inference" of scienter as required 

by the Private Securities Litigation Reform Act of 1995 ("PSLRA"). 
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For the Securities Act claims, the district court held that the 

complaint did not plausibly allege any material misrepresentations 

or omissions in relation to ARIAD's January 2013 common stock 

offering. 

We review the grant of a motion to dismiss for failure 

to state claim de novo.2 See Aldridge v. A.T. Cross Corp., 284 

F.3d 72, 78 (1st Cir. 2002). In doing so, we assume the truth of 

"the raw facts" set forth in the complaint. In re Bos. Sci. Corp. 

Sec. Litig., 686 F.3d 21, 27 (1st Cir. 2012). By contrast, we 

need not credit the plaintiffs' "legal conclusions or 

characterizations." Id. 

III. Exchange Act Claims 

Section 10(b) of the Exchange Act "forbids the 'use or 

employ, in connection with the purchase or sale of any security 

. . . , [of] any manipulative or deceptive device . . . ." Tellabs 

Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007) 

(alteration in original) (quoting 15 U.S.C. § 78j(b)). The SEC 

has implemented this provision via Rule 10b-5, which proscribes, 

among other things, "any untrue statement of a material fact" or 

omission of any "material fact necessary in order to make the 

statements made . . . not misleading." 17 C.F.R. § 240.10b-5. To 

 2 Because our review is de novo, we need not specifically 

address each of the plaintiffs' quibbles with the district court's 

analysis. See Fire & Police Pension Ass'n of Colo. v. Abiomed, 

Inc., 778 F.3d 228, 241 & n.5 (1st Cir. 2015). 
- 8 - 

state a claim under Section 10(b) and Rule 10b-5, a plaintiff must 

plead the following elements: (1) a material misrepresentation or 

omission; (2) scienter; (3) a connection with the purchase or sale 

of a security; (4) reliance; (5) economic loss; and (6) loss 

causation. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 

(1st Cir. 2008) (citing Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 

341-42 (2005)). 

The only two elements implicated by this appeal are the 

existence of a material misrepresentation and scienter. 

Ultimately, because we find that the complaint fails to adequately 

plead scienter with respect to most of the alleged misstatements, 

we need not determine whether those statements contained any 

misrepresentations or, if so, whether such misrepresentations were 

material. 

We have, however, recognized that "the materiality and 

scienter inquiries are linked." Abiomed, 778 F.3d at 240. This 

is because the marginal materiality of an omitted fact "tends to 

undercut the argument that defendants acted with the requisite 

intent . . . in not disclosing" it. Id. at 242 (citation omitted). 

Accordingly, we must bear in mind that a fact is material where 

there is "a substantial likelihood that" its disclosure "would 

have been viewed by the reasonable investor as having significantly 

altered the total mix of information made available." Basic Inc. 

v. Levinson, 485 U.S. 224, 231-32 (1988) (citation omitted). 
- 9 - 

The Supreme Court has described scienter as "a mental 

state embracing intent to deceive, manipulate, or defraud." 

Tellabs, 551 U.S. at 319 (citation omitted). The plaintiffs 

correctly point out that scienter also encompasses "a high degree 

of recklessness." Miss. Pub. Emps.' Ret. Sys. v. Bos. Sci. Corp., 

649 F.3d 5, 20 (1st Cir. 2011) (citation omitted). But, in this 

context, recklessness requires "an extreme departure from the 

standards of ordinary care, . . . which presents a danger of 

misleading buyers . . . that is either known to the defendant or 

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

omitted). 

At the pleading stage, the PSLRA requires plaintiffs to 

"state with particularity facts giving rise to a strong inference 

that the defendant acted with" scienter. 15 U.S.C. § 78u4(b)(2)(A) (emphasis added). "To qualify as 'strong' . . . an 

inference of scienter must be more than merely plausible or 

reasonable—it must be cogent and at least as compelling as any 

opposing inference of nonfraudulent intent." Tellabs, 551 U.S. at 

314. We have found this exacting standard satisfied where the 

complaint "contains clear allegations of admissions, internal 

records or witnessed discussions suggesting that at the time they 

made the statements claimed to be misleading, the defendant 

officers were aware that they were withholding vital information 

or at least were warned by others that this was so." Bos. Sci., 
- 10 - 

686 F.3d at 31. In imposing this heightened pleading standard, 

Congress recognized and accepted the "[i]nherent" risk of leaving 

"without remedy some wrongs that discovery or trial might have 

disclosed." Id. at 32. 

Here, ARIAD's alleged misstatements fall into two broad 

categories: (1) those made before the FDA's December 14, 2012 

limited approval of ponatinib and the corresponding disclosures; 

and (2) those made after such approval. We address each of these 

categories in turn below, and, with the exception of one preapproval statement, we agree with the district court that the 

complaint fails to give rise to the required strong inference of 

scienter. We also find the plaintiffs' allegations of insider 

trading insufficient to resuscitate the inadequate fraud claims. 

A. Pre-Approval 

 The first alleged misstatement identified during the 

pre-approval period occurred in a December 11, 2011 press release 

about the PACE 2 trial data. The release indicated that "[i]nitial 

safety data show ponatinib to be well tolerated." It went on to 

list the rates of some adverse events, including rash, 

thrombocytopenia, dry skin, abdominal pain, headache, and 

pancreatitis, but it did not mention the rate of cardiovascular 

events. As required by the PSLRA, the complaint purports to 

explain "why the statement [wa]s misleading," 15 U.S.C. § 78u4(b)(1), by referencing the CDER Report based on data collected 
- 11 - 

through July 23, 2012. The complaint identifies several similar 

statements by ARIAD about the safety of ponatinib between December 

2011 and mid-July 2012. The plaintiffs claim that each of these 

statements was materially misleading in light of the data reflected 

in the CDER Report. 

 But the plaintiffs' theory of fraud suffers from a 

glaring omission. The complaint contains conclusory allegations 

that the defendants possessed "contemporaneous[]" knowledge of 

various facts in the CDER Report, including the 8% rate of serious 

cardiovascular events, "based on their continuous monitoring of 

the PACE 2 trial data." The plaintiffs do not, however, allege 

any specific facts about when the defendants learned of these 

adverse events or even when the adverse events occurred. Rather, 

they impermissibly seek to establish fraud by hindsight, 

suggesting that, as early as December 2011, the defendants must 

have known about adverse events occurring up until the July 23, 

2012 cut-off date. Not only does this theory defy logic, it also 

ignores our caselaw's instruction that "[a] statement cannot be 

intentionally misleading if the defendant did not have sufficient 

information at the relevant time to form an evaluation that there 

was a need to disclose certain information and to form an intent 

not to disclose it." Biogen, 537 F.3d at 45; see also id. at 50 

(finding complaint insufficient to support inference of scienter 

where the plaintiffs "failed to allege when" the relevant adverse 
- 12 - 

events "became known"); Auto. Indus. Pension Tr. Fund v. Textron 

Inc., 682 F.3d 34, 39 (1st Cir. 2012) (affirming dismissal where 

"warnings by subordinates or expressions of concern by executives" 

were "notably absent"). 

The complaint's allegations about access to the PACE 2 

data do not fill this gap. Only one such allegation relates to 

the pre-approval period, and it stands for the unremarkable 

proposition that, as of May 9, 2012, ARIAD was "in the process of 

collecting, QCing, [and] processing the data." The paragraph is 

silent on the crucial questions of when the serious adverse events 

occurred and when the defendants became aware of them. 

In addition to statements about ponatinib's safety, the 

complaint also cites various allegedly misleading statements about 

dose reductions. For example, on December 12, 2011, Haluska, 

ARIAD's Chief Medical Officer, told investors, "we haven't 

quantified yet the number of dose interruptions or dose reductions" 

in the PACE 2 study. The plaintiffs' theory of fraud follows a 

familiar pattern: this statement was purportedly misleading 

because of the defendants' contemporaneous knowledge of certain 

facts in the CDER Report, including the fact that 73% of patients 

required a dose interruption or dose reduction. Subsequent 

paragraphs contain similar allegations. We are, however, left to 

guess as to precisely when the defendants became aware of the dose 

reductions. 
- 13 - 

For these reasons, we have little trouble concluding 

that the complaint fails to create a compelling inference of 

scienter with respect to statements made before the July 23, 2012 

cut-off date for the CDER Report. Indeed, the plaintiffs come 

close to conceding as much by alleging that the defendants 

possessed knowledge of the relevant adverse events and dosage 

reductions "[b]y no later than July 23, 2012."

Arguably, the analysis could be different for time 

periods after that date if the defendants were familiar with the 

data that ARIAD provided to the FDA. But the complaint contains 

no such allegation. In fact, aside from a conclusory statement 

that Haluska "participated in the creation" of ARIAD's July 

submission, the complaint fails to indicate whether and to what 

extent the defendants were involved in collecting or reviewing the 

relevant data. Accordingly, we find the plaintiffs' allegations 

insufficient to state a claim with respect to the purported 

misstatements from July 23 through October 2012. 

 On October 25, 2012, the FDA sent an email to unspecified 

individuals at ARIAD rejecting the company's proposed label for 

ponatinib due to inadequate safety disclosures. The agency cited 

the 8% rate of serious cardiovascular events in the PACE 2 trial 

data, as well as the 73% dose reduction rate. A follow-up meeting 

was held on November 1, 2012, which included FDA personnel, 

Haluska, and Clackson, ARIAD's Chief Scientific Officer, among 
- 14 - 

others. After that meeting, the FDA directed ARIAD to submit a 

revised label with a black box warning.

 In light of these later communications with the FDA, the 

plaintiffs' allegations are sufficient to support a strong 

inference of scienter with respect to one particular material 

misstatement.3 On December 11, 2012, an investment bank published 

a report on ARIAD based on a breakfast meeting the previous day 

with Chairman and CEO Berger, Haluska, and Clackson, among others. 

The report stated, in pertinent part, that "management continues 

to be optimistic about ponatinib's prospects for approval in the 

U.S. . . . with a favorable label." It further indicated that the 

drug's "profile continues to look very benign, with few worrisome 

 3 The plaintiffs point to two other purported misstatements 

between October 25 and December 11, 2012. The complaint fails to 

create an inference that these statements were knowingly false. 

First, the plaintiffs cite Berger's November 7 response on an 

analyst conference call, "I can't speak to what the label [for 

ponatinib] is going to look like." Because ARIAD was, at the time, 

in negotiations with the FDA about the label, this statement was 

literally true. Nor was it materially misleading for Berger to 

omit certain details of the company's interactions with the FDA. 

See Abiomed, 778 F.3d at 244 (citing the need for "give and take" 

with the regulator). 

Second, the plaintiffs take issue with ARIAD's November 9, 

2012 Form 10-Q, which indicated that there had been "no material 

changes to the risk factors" included in the prior Form 10-K. Even 

assuming that this statement was materially misleading, the 

plaintiffs point to no allegation that Berger or CFO Fitzgerald, 

the two defendants who signed the document, were involved in the 

October 25 or November 1 communications with the FDA. Accordingly, 

the complaint fails to support a compelling inference of scienter. 
- 15 - 

signals." The report cited pancreatitis as "the most prevalent" 

serious adverse event (occurring in 5% of patients) and noted "low 

rates of cardiovascular issues." 

Assuming these allegations are true, it was knowingly or 

recklessly misleading for Haluska and Clackson to express optimism 

about ponatinib's chances for approval with a "favorable label" 

weeks after learning that the FDA had rejected ARIAD's proposed 

label. While management may have held out hope of achieving this 

result, the expression of that hope without disclosure of recent 

troubling developments created an impermissible risk of misleading 

investors. See Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 

597, 610 (4th Cir. 2015) (finding "a strong inference that the 

defendants either knowingly or recklessly misled investors by 

failing to disclose critical information received from the FDA . 

. . , while releasing less damaging information that they knew was 

incomplete"). Similarly, after the FDA specifically noted the 8% 

rate of serious cardiovascular events, it was knowingly or 

recklessly misleading for ARIAD to cite pancreatitis as the most 

prevalent serious adverse event. See Aldridge, 284 F.3d at 83 

("[T]he fact that the defendants published statements when they 

knew facts suggesting the statements were inaccurate or 

misleadingly incomplete is classic evidence of scienter."). 

ARIAD fails to develop any argument that these 

misstatements were not material, and, in any event, we have little 
- 16 - 

difficulty concluding that disclosure of the FDA's concerns or the 

rate of serious cardiovascular events with respect to ARIAD's 

leading product would have altered the total mix of information 

available to investors. For these reasons, we reverse the district 

court's dismissal of the Section 10(b) and Rule 10b-5 claims 

predicated upon this December 11, 2012 press release.4

B. Post-Approval

 The plaintiffs' post-approval allegations rely on the 

same type of fraud by hindsight theory that doomed the majority of 

their pre-approval claims. It is undisputed that, on December 14, 

2012, ARIAD disclosed to investors the 8% rate of serious 

cardiovascular events as well as the FDA's requirement of a black 

box warning. The complaint nonetheless identifies various 

subsequent statements about ponatinib that were purportedly 

misleading for failure to disclose an increase in the rate of 

adverse events after the July 2012 cut-off date. More 

specifically, the rate of serious cardiovascular events is said to 

have increased from 8% to 11.8%. The alleged misstatements 

occurred between March 1 and August 9, 2013, but the plaintiffs 

rely on data collected through an unspecified date in August to 

claim that those statements were fraudulent. Because the complaint 

 4 Because the district court dismissed the Section 10(b) and 

Rule 10b-5 claims, it also dismissed the derivative Section 20(a) 

claims without any additional analysis. We vacate that dismissal 

with respect to the December 11, 2012 release. 
- 17 - 

fails to indicate when the adverse events occurred, let alone when 

the defendants became aware of them, it fails to create a strong 

inference of scienter. 

Nor do the plaintiffs' allegations of access to postapproval data get them over the PSLRA's pleading hurdle. To be 

sure, these allegations are more extensive and detailed than their 

pre-approval counterparts. But the plaintiffs still fail to allege 

specifically when the defendants became aware of any adverse 

events. See Police Ret. Sys. of St. Louis v. Intuitive Surgical, 

Inc., 759 F.3d 1051, 1063 (9th Cir. 2014) (affirming dismissal 

despite alleged access to undisclosed data absent "allegations 

linking specific reports and their contents to the executives"). 

And, more fundamentally, the defendants self-evidently could not 

have been aware of adverse events that had not yet occurred. The 

complaint is silent with respect to the rate of adverse events at 

the time that each of the alleged misstatements was made. This 

omission is fatal where, as here, the collection of data may have 

continued after the last of the purported misstatements and the 

total increase was a relatively modest 3.8%.5

 5 The plaintiffs cite the FDA's finding that, "[i]n some 

patients," adverse events "occurred as early as 2 weeks" after 

taking ponatinib. But the agency's indication that some patients 

experienced adverse events as early as two weeks into therapy tells 

us nothing about whether the rate of overall adverse events had 

increased and, if so, by how much as of the relevant dates. 
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C. Insider Trading 

 The plaintiffs seek to bolster their fraud claims with 

allegations of insider trading by the officer defendants. As an 

initial matter, while such insider trading may be "probative of 

scienter," it is not sufficient to establish an inference of 

scienter on its own. Greebel v. FTP Software, Inc., 194 F.3d 185, 

197-98 (1st Cir. 1999). 

Here, during the pre-approval period, the complaint 

alleges that Haluska, Clackson, and Fitzgerald sold "irregular 

amounts of shares."6 These three defendants made their last preapproval trades on May 2, August 15, and October 1, 2012, 

respectively. Thus, both Haluska and Clackson ceased pre-approval 

sales more than a month and a half before the October 5 high-point 

of ARIAD's share price. Accordingly, the timing of their trades 

"does not appear very suspicious." Id. at 206. Fitzgerald, the 

defendant who traded closest to that date, was ARIAD's CFO and the 

least likely of the three to have been privy to material nonpublic information about the clinical trials. Moreover, the 

defendants' trades are readily explainable by the steady increase 

in ARIAD's share price during the class period, which "create[d] 

 6 We note at the outset that the defendants' use of 10b5-1 

trading plans, see 17 C.F.R. § 240.10b5-1(c), is not dispositive 

in light of the plaintiffs' allegation that those plans were 

executed after the beginning of the fraudulent scheme. See Emps.' 

Ret. Sys. of Gov't of the V.I. v. Blanford, 794 F.3d 297, 309 (2d 

Cir. 2015). 
- 19 - 

a substantial incentive for holders to sell" regardless of any 

material non-public information. Local No. 8 IBEW Ret. Plan & Tr. 

v. Vertex Pharm., Inc., No. 15-2250, 2016 WL 5682548, at *7 (1st 

Cir. Oct. 3, 2016). 

Plaintiffs' insider trading allegations with respect to 

the post-approval period do not fare any better. For one thing, 

the post-approval trades, by definition, occurred after the 

December 14, 2012 disclosure of the black box warning and the 

corresponding decline in share price. Additionally, Berger, 

Fitzgerald, Haluska, and Clackson are all alleged to have entered 

into the operative 10b5-1 plans within days of that disclosure. 

At this early date, any information about an undisclosed increase 

in the rate of serious adverse events would likely have been 

minimal. Where, as here, the complaint is otherwise devoid of 

facts supporting the defendants' knowledge of material non-public 

information, these alleged insider sales are insufficient to 

salvage the plaintiffs' fraud claims. 

IV. Securities Act Claims 

 The second set of claims allege violations of Section 11 

of the Securities Act stemming from a January 2013 common stock 

offering. The Securities Act "was designed to provide investors 

with full disclosure of material information concerning public 

offerings." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976). 

Section 11 advances this goal by creating virtually strict 
- 20 - 

liability for any "untrue statement" or misleading omission of 

material fact in a registration statement. 15 U.S.C. § 77k(a). 

The right to sue under Section 11 is limited to "any 

person acquiring such security." Id. Thus, "an action . . . may 

be maintained only by those who purchase securities that are the 

direct subject of the prospectus and registration statement." 

Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset 

Acceptance Corp., 632 F.3d 762, 768 n.5 (1st Cir. 2011) (citation 

omitted). But, in order to state a claim, the plaintiffs "need 

not have purchased shares in the offering." In re Century Aluminum 

Co. Sec. Litig., 729 F.3d 1104, 1106 (9th Cir. 2013). Rather, 

"those who purchased shares in the aftermarket have standing to 

sue provided they can trace their shares back to the relevant 

offering." Id. (citing cases); see also, e.g., Krim v. 

pcOrder.com, Inc., 402 F.3d 489, 495-96 & n.28 (5th Cir. 2005) 

(citing cases). This requirement is satisfied where, for example, 

"all of a company's shares have been issued in a single offering 

under the same registration statement." Century, 729 F.3d at 1106; 

see also Nomura, 632 F.3d at 766 (involving alleged misstatements 

in offering documents for "trust certificates representing 

mortgage-backed securities," each of which was associated with one 

of two challenged registration statements). 
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 This "statutory standing"7 inquiry becomes more 

complicated where, as here, the company has issued shares under 

multiple registration statements. In these circumstances, "the 

plaintiff must prove that [his or] her shares were issued under 

the allegedly false or misleading registration statement, rather 

than some other registration statement." Century, 729 F.3d at 

1106. The parties disagree about the import of this requirement 

at the pleading stage. The plaintiffs cite cases for the 

proposition that mere "general allegations" that their shares are 

traceable to the offering in question are sufficient to avoid 

dismissal. The defendants counter that these cases fail to account 

appropriately for the Supreme Court's decisions in Bell Atlantic 

Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 

U.S. 662 (2009). Because we agree with the defendants on this 

point, we affirm the dismissal of the Section 11 claims.8 

 7 The parties refer to this issue as statutory standing, and 

the district court correctly noted that it does not implicate 

Article III. See Cooperman v. Individual Inc., 171 F.3d 43, 47 

n.3 (1st Cir. 1999). Rather, the defendants' attack on the 

sufficiency of the complaint is appropriately analyzed under Fed. 

R. Civ. P. 12(b)(6). See Century, 729 F.3d at 1109. 

8 The complaint also includes derivative claims under Section 

15. See Shaw v. Dig. Equip. Corp., 82 F.3d 1194, 1201 n.2 (1st 

Cir. 1996), superseded by statute on other grounds, 15 U.S.C. 

§ 78u-4(b)(2). Because the Section 11 claims were properly 

dismissed, we affirm the dismissal of the derivative claims as 

well. 
- 22 - 

 Twombly teaches that, in order to survive a motion to 

dismiss, a complaint must include "enough facts to state a claim 

to relief that is plausible on its face." 550 U.S. at 570. This 

standard requires more than a mere "formulaic recitation of the 

elements of a cause of action." Id. at 555; see also Iqbal, 556 

U.S. at 681 (holding that "conclusory" allegations are "not 

entitled to be assumed true"). Accordingly, "allegations that 

merely parrot the relevant legal standard are disregarded." 

Manning v. Bos. Med. Ctr. Corp., 725 F.3d 34, 43 (1st Cir. 2013). 

Moreover, "[w]here a complaint pleads facts that are 'merely 

consistent with' a defendant's liability, it 'stops short of the 

line between possibility and plausibility of "entitlement to 

relief."'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 

557). 

 We find this binding precedent difficult to square with 

the plaintiffs' contention that general allegations of 

traceability, without more, are sufficient at the pleading stage. 

Indeed, traceability is an element of a Section 11 claim. See, 

e.g., Nomura, 632 F.3d at 768 n.5; Century, 729 F.3d at 1106. And, 

almost by definition, a general allegation that a plaintiff's 

shares are traceable to the offering in question is nothing more 

than a "formulaic recitation" of that element. Twombly, 550 U.S. 

at 555. Accordingly, we agree with the other circuit that has 

squarely addressed this issue and hold that such general 
- 23 - 

allegations alone are not sufficient to avoid dismissal. See 

Century, 729 F.3d at 1107; see also Yates v. Mun. Mortg. & Equity, 

LLC, 744 F.3d 874, 901 (4th Cir. 2014) (reaching same result under 

the analogous, though not identical, Section 12(a)(2)). 

 The question now becomes whether the complaint sets 

forth sufficient facts to plausibly suggest that the shares 

purchased by the plaintiffs were issued as part of the January 

2013 offering. The plaintiffs could have met this bar by pleading 

that they "purchased their shares directly in the secondary 

offering itself." Century, 729 F.3d at 1106. But the complaint 

expressly precludes this possibility, instead alleging that the 

named plaintiffs all bought their shares "on the open market." 

Accordingly, they must plead sufficient facts to suggest that 

"their shares, although purchased in the aftermarket, can be traced 

back to the secondary offering." Id. About 15.3 million shares 

were issued in connection with the January 2013 offering, but an 

additional 166 million were already outstanding at that time. 

Moreover, only one of the named plaintiffs bought on the day of 

the offering and none of them paid the offering price. See Yates, 

744 F.3d at 900 n.13 (noting price difference). In these 

circumstances, the complaint fails to give rise to a plausible 

inference that the plaintiffs' shares were issued as part of the 

January 2013 offering. Indeed, the "'obvious alternative 

explanation' is that they could instead have come from the pool of 
- 24 - 

previously issued shares." Century, 729 F.3d at 1108 (quoting 

Twombly, 550 U.S. at 567).9 

V. Conclusion

 For the foregoing reasons we REVERSE the district 

court's dismissal of the Section 10(b), Rule 10b-5, and Section 

20(a) claims predicated upon the December 11, 2012 press release. 

We otherwise AFFIRM the dismissal of the fraud claims. Similarly, 

we AFFIRM the dismissal of the Section 11 and Section 15 claims. 

The case is remanded for further proceedings consistent with this 

opinion. The parties shall bear their own costs. 

 9 The complaint fails to allege traceability sufficient to 

state a Section 11 claim for any member of the purported class; 

accordingly, we need not address the lead plaintiffs' contention 

that they should be permitted to pursue such a claim on behalf of 

the class irrespective of their individual statutory standing.