United States Court of Appeals 

For the First Circuit 

Nos. 18-1369, 18-1472 

METZLER ASSET MANAGEMENT GMBH, on behalf of itself and all other 

similarly situated parties; 

ERSTE-SPARINVEST KAPITALANANLAGEGESELLSCHAFT MBH, on behalf of 

itself and all other similarly situated parties, 

Plaintiffs, Appellants/Cross-Appellees, 

v. 

STUART A. KINGSLEY; GEORGE A. SCANGOS; PAUL J. CLANCY; 

 BIOGEN INC., 

Defendants, Appellees/Cross-Appellants. 

APPEALS FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS 

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

Before 

Lynch, Stahl, and Barron, 

Circuit Judges. 

Gregg S. Levin, with whom Christopher F. Moriarity, William 

H. Narwold, Motley Rice LLC, Jonathan Gardner, Labaton Sucharow 

LLP, Robert M. Rothman, Mark T. Millkey, Susan K. Alexander, Andrew 

S. Love, and Robbins Geller Rudman & Dowd LLP were on brief, for 

appellants/cross-appellees. 

 James R. Carroll, with whom Michael S. Hines, Sara J. van 

Vliet, and Skadden, Arps, Slate, Meagher & Flom LLP were on brief, 

for appellees/cross-appellants. 
June 27, 2019 
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BARRON, Circuit Judge. Metzler Asset Management GmbH 

("Metzler") and Erste–Sparinvest Kapitalanlagegesellschaft mbH 

("Erste–Sparinvest") have been designated the lead plaintiffs, 

pursuant to the Private Securities Litigation Reform Act 

("PSLRA"), 15 U.S.C. § 78u-4, in a federal securities class action 

that they brought against Biogen Inc. and three Biogen executives 

("Biogen"). The suit alleges that Biogen and its executives 

committed fraud, in violation of regulations promulgated by the 

Securities and Exchange Commission pursuant to the Securities 

Exchange Act, 15 U.S.C. § 78a et seq, by falsely stating that 

Biogen's product, Tecfidera, was both safer and more widely used 

than it was. The putative class is comprised of all purchasers of 

Biogen common stock from July 23, 2014, through July 23, 2015. 

The defendants moved to dismiss the suit on claim 

preclusion grounds, based on this Court's earlier decision in In 

re Biogen Inc. Securities Litigation, 857 F.3d 34 (1st Cir. 2017) 

("Biogen I"), and for failing to plead facts "giving rise to a 

strong inference" of scienter, 15 U.S.C. § 78u-4(b)(2)(A), as the 

PSLRA requires that a complaint alleging fraud must in order for 

it to survive such a motion. The District Court rejected the 

defendants' claim preclusion argument but dismissed the suit under 

the PSLRA for failing to adequately plead scienter. We affirm. 
- 4 - 

I. 

The corporate defendant, Biogen, is a multinational 

biotechnology company based in Cambridge, Massachusetts. Its 

stock trades on the NASDAQ. Id. at 37. The three individual 

defendants are George Scangos, who was Biogen's Chief Executive 

Officer from July 23, 2014, through July 23, 2015; Paul Clancy, 

who was Biogen's Chief Financial Officer and Executive Vice 

President of Finance during that time; and Stuart Kingsley, who 

was its Executive Vice President of Global Commercial Operations 

during the same period. Id. 

The plaintiffs' complaint sets forth the following 

allegations. Biogen developed and sold a United States Food and 

Drug Administration ("FDA") approved drug for multiple sclerosis 

("MS") called Tecfidera during the relevant time period. Tecfidera 

accounted for a third of Biogen's total revenue in this time frame. 

As of July 23, 2014, Tecfidera bore a label that warned patients 

taking the drug of an increased risk of developing lymphopenia -- a 

condition of having low lymphocyte counts, leading to a weakened 

immune system. 

On October 22, 2014, Biogen held a third-quarter 

earnings call with its investors. The company announced for the 

first time publicly that an MS patient who had been regularly 

taking Tecfidera had died of progressive multifocal 

leukoencephalopathy ("PML"), a rare neurological disease which 
- 5 - 

counts lymphopenia as one of its precursors. One month later, 

Biogen amended the Tecfidera label to include a warning about the 

risk of PML. 

On January 29, 2015, Biogen provided full-year revenue 

guidance for 2015. It predicted a 14% to 16% overall growth rate 

for the company for the year. However, on April 24, 2015, Biogen 

released first-quarter financial results for the year that showed 

that Tecfidera's revenue had fallen below the market estimates. 

On July 24, 2015, Biogen released its second-quarter 

earnings report. The report amended the company's 2015 revenue 

guidance. It lowered Biogen's predicted revenue growth from 14-16% 

to 6-8% for the year. Biogen attributed its tempered expectations, 

in part, to slowing Tecfidera growth. 

Biogen's stock fell by more than 20% in one day due to 

the second quarter earnings report. On October 9, 2015, Biogen 

announced that Kingsley was leaving the company. Less than two 

weeks later, the company announced that it was cutting roughly 11% 

of its workforce. Id. at 39. 

On August 18, 2015, a putative federal securities fraud 

class action was filed in the District of Massachusetts against 

the company and the same three individual defendants in the case 

before us in this appeal. Id. at 36-39. The putative class in 

that action consisted of persons who had purchased common stock of 

Biogen between January 29, 2015, and July 23, 2015. Tehrani v. 
- 6 - 

Biogen, Inc., No. 15-13189, 2015 WL 7302132, at *1 (D. Mass. Nov. 

18, 2015). The suit alleged that Biogen and the three executives 

had fraudulently misled investors, in violation of Sections 10(b)1

and 20(a)2 of the Securities Exchange Act of 1934, see 15 U.S.C. 

§§ 78j(b), 78t(a), regarding Tecfidera's usage rates in light of 

the PML incident. Tehrani, 2015 WL 7302132, at *1. 

Notice of the action was published pursuant to the PSLRA,

which establishes procedures for bringing securities class 

actions. See id. at *2. In accordance with those procedures, on 

November 17, 2015, the District Court preliminarily appointed GBR 

Group Ltd. ("GBR") "lead plaintiff" in the matter, a status that 

Congress created in the PSLRA "to increase the chances that 

securities fraud cases are brought by investors who have 

substantial and genuine interests in the litigation." Id. 

On January 19, 2016, GBR filed an amended complaint. 

The amended complaint changed the class period, such that it ran 

from December 2, 2014, through July 23, 2015. Biogen I, 857 F.3d 

at 36. 

 1 Section 10(b), as set forth in 15 U.S.C. § 78j(b), makes it 

unlawful "[t]o use or employ, in connection with the purchase or 

sale of any security . . . any manipulative or deceptive device or 

contrivance in contravention of such rules and regulations as the 

Commission may prescribe." 

2 Section 20(a), as set forth in 15 U.S.C. § 78t(a), creates 

"[j]oint and [s]everal" liability for "[e]very person who, 

directly or indirectly, controls any person liable under any 

provision of this chapter or of any rule or regulation thereunder." 
- 7 - 

Biogen moved to dismiss the complaint. The District 

Court granted that motion as to both the Section 10(b) and 20(a) 

claims. See Biogen I, 193 F. Supp. 3d 5, 56 (D. Mass. 2016). 

GBR moved to vacate the order of dismissal and for leave 

to file a second amended complaint with the District Court under 

Federal Rules 59(e) and 60(b)(2). In re Biogen Inc. Sec. Litig., 

No. 15-13189, 2016 WL 5660329, at *3 (D. Mass. Sept. 28, 2016). 

The motion requested that the District Court vacate the order of 

dismissal based on the new scienter allegations in the proposed 

second amended complaint. Id. The District Court denied the 

motion. Id. at *6. The District Court determined that the 

plaintiffs could have discovered the evidence on which they were 

based earlier with reasonable diligence. Id. 

GBR appealed both the dismissal of the complaint for 

failure to state a claim as well as the denial of its motion to 

vacate that dismissal and for leave to file the second amended 

complaint. As discussed below, that appeal ultimately ended in 

affirmance of the District Court. During the pendency of the 

appeal in that case, however, separate Biogen stockholders filed 

a subsequent putative class action in the District Court on October 

20, 2016, against Biogen and certain of its executives on behalf 

of a class of investors in the company. Metzler Asset Mgmt. GmbH 

v. Kingsley ("Biogen II"), 305 F. Supp. 3d 181, 205, 202 (D. Mass. 

2018). They alleged that, through its comments to investors, 
- 8 - 

Biogen misled the market about Tecfidera's safety profile and 

discontinuation rates. 

This new action is the one before us on appeal. It, 

too, asserts violations of Sections 10(b) and 20(a) of the 

Securities Exchange Act. Nonetheless, it differs from the first 

putative class action that had been filed against Biogen in three 

ways. First, the class period for the putative class in the new 

suit began on July 23, 2014, as opposed to December 2, 2014. 

Second, the complaint in the new suit alleged that Biogen had made 

additional misleading statements not referenced in the prior suit 

and also set forth statements from confidential witnesses ("CWs") 

to prove scienter that had not been referenced in the complaint in 

the earlier suit. These newly alleged statements included ones 

that had been set forth in the amended complaint in the earlier 

putative class action that the District Court rejected for not 

having been included in a timely manner. See Biogen I, 857 F.3d 

at 45-46. Third, the new suit alleged that, in addition to making 

fraudulent statements regarding Tecfidera's usage rate, Biogen 

executives also made fraudulent statements about the drug's safety 

profile.

On February 1, 2017, the District Court preliminarily 

appointed Metzler and Erste–Sparinvest -- not GBR -- to be the 

lead plaintiffs in this new suit pursuant to the PSLRA. See 

Metzler Asset Mgmt. GmbH v. Kinglsey, No. 16-12101, 2017 WL 438731 
- 9 - 

(D. Mass. Feb. 1, 2017). Plaintiffs also filed a motion to stay 

the District Court proceedings pending resolution of the appeal of 

the earlier action. That motion was denied. Id. at *4.

On May 12, 2017, we affirmed the District Court's order 

of dismissal for lack of sufficient allegations of scienter in 

Biogen I. Biogen I, 857 F.3d at 46. In so doing, we also held 

that the confidential witness statements provided by the 

plaintiffs were "insufficiently particular" to prove scienter. 

Id. at 41. Finally, we denied the plaintiffs' motion to vacate 

and file a second amended complaint. Id. at 45. 

Following Biogen I, Biogen moved to dismiss the 

complaint in the putative class action that is now before us for 

failing to adequately plead scienter and on claim preclusion 

grounds. The District Court rejected the claim preclusion argument 

but agreed that the complaint in the new suit failed to plead facts 

sufficient to create a strong inference of scienter. Biogen II, 

305 F. Supp. 3d at 205, 222. The appeal from that ruling then 

followed. 

II. 

To establish claim preclusion, the defendant must show 

that "(1) the earlier suit resulted in a final judgment on the 

merits, (2) the causes of action asserted in the earlier and later 

suits are sufficiently identical or related, and (3) the parties 

in the two suits are sufficiently identical or closely related." 
- 10 - 

Airframe Sys., Inc. v. Raytheon Co., 601 F.3d 9, 14 (1st Cir. 

2010). The District Court rejected Biogen's claim preclusion 

argument. See Biogen II, 305 F. Supp. 3d at 205. The District 

Court did not question whether Biogen I represented a final 

judgment, as it plainly did. Id. at 204. Nor did the District 

Court rule that that the causes of action in the two cases were 

not related or identical, as it found that they were. Id. Instead, 

the District Court rejected the contention that GBR, as lead 

plaintiff under the PSLRA in Biogen I, could "adequate[ly] 

represent" the class in Biogen II, such that the plaintiffs in the 

two actions may be deemed to be sufficiently "identical," as they 

must be for claim preclusion to apply. Id. at 205. 

The District Court explained that the putative class in 

Biogen I was not certified through Federal Rule of Civil Procedure 

23 and thus remained merely a "proposed class action[.]" Id. 

(citing Smith v. Bayer Corp., 564 U.S. 299, 316 (2011)). For that 

reason, the District Court ruled, GBR could not, by virtue of its 

role as the lead plaintiff under the PSLRA in Biogen I, be deemed 

to have "adequate[ly] represented" the putative class in Biogen 

II. 

In reaching this conclusion about whether the members of 

the putative class in Biogen II were adequately represented by GBR 

in Biogen I, the District Court relied on the Supreme Court's 

ruling in Smith. There, the Supreme Court held that a consumer's 
- 11 - 

motion for class certification was not precluded by a previous 

decision denying a similar motion for class certification to a 

different party. Smith, 564 U.S. at 304-05. The Court stated, 

"[w]e could hardly have been more clear [in Taylor v. Sturgell, 

553 U.S. 880 (2008)] that a 'properly conducted class action,' 

with binding effect on nonparties, can come about in federal courts 

in just one way -- through the procedure set out in Rule 23." Id. 

at 316. 

Biogen argues that the District Court erred in this 

aspect of its claim preclusion analysis. Biogen contends that the 

PSLRA's process for appointing a lead plaintiff sufficed to ensure 

that GBR, in its role as lead plaintiff of the putative class in 

Biogen I, did adequately represent the interests of the putative 

class in Biogen II, even though the class in Biogen I had not been 

certified at the time of the dismissal of that action. Thus, 

Biogen contends that the dismissal in Biogen I could be preclusive 

of the claims brought by the putative class in Biogen II, even 

though GBR is not the lead plaintiff for that putative class. 

In challenging Biogen's claim preclusion argument, the 

appellants contend that the protections afforded absent parties by 

the PSLRA are not as robust as those afforded by the requirements 

set forth in Rule 23 itself, due to the preliminary nature of the 

PSLRA's lead plaintiff appointment procedures. Indeed, as 

multiple courts have recognized, nothing about lead plaintiff 
- 12 - 

appointment pursuant to the PSLRA is "dispositive with respect to 

the ultimate certification of the class and designation of a class 

representative." Greebel v. FTP Software, Inc., 939 F. Supp. 57, 

62 n.4 (D. Mass 1996); Dempsey v. Vieau, 130 F. Supp. 3d 809, 813 

(S.D.N.Y. 2015) ("Lead plaintiff designation does not abnegate the 

necessity of class certification . . . ."). Consequently, the 

argument proceeds, lead plaintiff appointment pursuant to the 

PSLRA is simply too preliminary for a lead plaintiff of an 

as-yet-uncertified class to be deemed on that basis alone to be an 

adequate representative for claim preclusion purposes of a class 

in a subsequent action. Dempsey, 130 F. Supp. 3d at 813. 

In addition to this potential problem with Biogen's 

claim preclusion contention here, there is another that is more 

particular to this case. The proposed class in Biogen II includes 

stockholders who purchased Biogen securities between July 23, 

2014, and December 2, 2014. This group of purchasers was not 

included in the class proposed in Biogen I. Biogen does not 

explain how the lead plaintiff in Biogen I could be thought to 

have adequately represented those members of the proposed class in 

Biogen II who are not only represented by different lead plaintiffs 

but also were not even members of the putative class in Biogen I. 

We need not, however, resolve the claim preclusion issue 

definitively here. Even if we were to assume that the adequate 

representation requirement could not be satisfied here, such that 
- 13 - 

the plaintiffs' claim is not precluded, the suit in Biogen II would 

still have to be dismissed. As we next explain, the District Court 

properly ruled that, under the PSLRA, the plaintiffs failed to 

adequately plead scienter for purposes of surviving a motion to 

dismiss for failure to state a claim. 

III. 

To state a claim under Section 10(b)3 of the Securities 

Exchange Act, plaintiffs must adequately plead "(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." Biogen I, 857 F.3d at 41. Scienter 

is defined as either the "intentional or willful conduct designed 

to deceive or defraud investors" or "a high degree of 

recklessness." Id. (internal quotations omitted). 

Under the PSLRA, to survive a motion to dismiss for 

failure to state a claim, plaintiffs must "state with particularity 

facts giving rise to a strong inference that the defendant acted 

with [scienter]." 15 U.S.C. § 78u-4(b)(2)(A) (emphasis added). 

"For an inference of scienter to be strong, 'a reasonable person 

 3 As the plaintiffs' Section 20(a) claims are necessarily 

dependent on the existence of a Section 10(b) violation, our 

analysis need only address the deficiencies in the plaintiffs' 

Section 10(b) claims in order to uphold the District Court's 

decision. See ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 

67 (1st Cir. 2008) ("The plain terms of [S]ection 20(a) indicate 

that it only creates liability derivative of an underlying 

securities violation."). 
- 14 - 

would [have to] deem [it] cogent and at least as compelling as any 

opposing inference one could draw from the facts alleged.'" Biogen 

I, 857 F.3d at 41 (alterations in original) (quoting Tellabs, Inc. 

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

The District Court dismissed the plaintiffs' suit in 

Biogen II after determining that none of the statements that the 

plaintiffs allege that the individual Biogen executive defendants 

made were of a kind that could give rise to the "strong inference" 

of scienter that the PSLRA requires. On that basis, the District 

Court concluded that the claims against each of these executives 

individually, as well as the claims against Biogen itself, must be 

dismissed. Cf. Biogen I, 857 F.3d at 37, 41. Our review of the 

District Court's ruling on scienter is de novo. See id. at 41. 

To make their case on appeal, the plaintiffs focus on 

six statements in their complaint that the District Court held, in 

making its scienter ruling, were at least "plausibly misleading." 

Biogen II, 305 F. Supp. 3d at 206, 212.4 These statements fall 

into two general categories: (1) those that pertain to Tecfidera's 

 4 For the purpose of this appeal, we will assume, favorably 

to plaintiffs, that the District Court was correct in concluding 

that these six statements were, in fact, "plausibly misleading." 

Although we do not definitively conclude that these six statements 

are plausibly misleading, we will nonetheless refer to them 

throughout the opinion as the six "plausibly misleading" 

statements for clarity's sake. 
- 15 - 

safety profile, and (2) those that pertain to Tecfidera's usage 

rate. We consider the statements in each category in turn. 

Before doing so, however, we note that although the 

statements that we focus on were made by, respectively, Alfred 

Sandrock (Biogen's Chief Medical Officer), Doug Williams (Biogen's 

Executive Vice President of Research and Development) and 

Kingsley, only Kingsley is a defendant in his own right. Thus, it 

is unclear what role, if any, the statements by Sandrock and 

Williams serve in the plaintiffs' fraud claims against Kingsley, 

Scangos, and Clancy. But, even if we assume that Williams's and 

Sandrock's statements somehow could be imputed to these three 

individual defendants, as the plaintiffs appear implicitly to 

assume in their briefing to us in contending that the District 

Court erred in dismissing the claims against them, the plaintiffs' 

argument would still fail. 

A. 

The first category of statements on which the plaintiffs 

in this appeal rely with respect to the claims against the 

individual defendants concerns Tecfidera's safety profile. The 

plaintiffs point to two such statements, the first of which was 

made on September 11 by Sandrock. According to the complaint, 

Sandrock stated at that time that "Tecfidera continues to provide 

patients with effective oral treatment for MS that is supported by 
- 16 - 

a growing body of data reinforcing its benefits and favorable 

safety profile." 

The complaint alleges that Sandrock made this statement 

before Biogen's October announcement of the PML-related death, and 

the plaintiffs do not contend that any of the individual defendants 

knew about that death before Sandrock made this statement.5 The 

plaintiffs nevertheless contend that the District Court erred in 

concluding that the complaint failed adequately to allege that 

Sandrock made the statement with the "intentional or willful" 

design to deceive investors. 

To make this case, the plaintiffs point out that, in 

August and September of 2014, Dr. Ben Thrower, the medical director 

at the Shepherd Center in Atlanta, notified Keith Ferguson, the 

company's senior sales director, and Eric Hall, the medical science 

liaison for Biogen, that his research showed that patients who 

were taking Tecfidera had a higher risk of developing low 

lymphocyte counts than Biogen had originally disclosed. The 

complaint further alleges that, for this reason, Dr. Thrower chose 

to discontinue Tecfidera prescriptions for approximately 200 of 

his patients and to stop issuing new prescriptions for the drug. 

 5 CW 15's statements that Biogen had already prepared a 

response for a potential PML-related death is not to the contrary.

That the company had a PML-related contingency in place for a drug 

that it already knew -- and disclosed -- caused low lymphocyte 

counts is not surprising and does not indicate that Sandrock made 

the statement at issue deceitfully. 
- 17 - 

The complaint also alleges that he told Ferguson and Hall about 

this development. 

But, according to the complaint, Sandrock in his 

September 2014 statement said only that Tecfidera was "effective" 

at treating MS and that its safety profile was "supported by a 

growing body of data." Nothing about Dr. Thrower's alleged 

statements to Hall and Ferguson about his own research 

findings -- especially given the limited slice of the market on 

which those findings were based -- contradicts the statements that 

the complaint alleges that Sandrock made. See Geffon v. Micrion 

Corp., 249 F.3d 29, 36 (1st Cir. 2001) ("Even if the statements at 

issue were material and false or misleading, the evidence does not 

support a finding that defendants knew the statements would 

materially mislead the investing public." (emphasis omitted)). 

Thus, even assuming that Sandrock's statement was "plausibly 

misleading" and made with knowledge of Thrower's conclusions, we 

find insufficient support for a "strong inference" that Sandrock 

spoke with the intent to deceive investors. And thus, the 

allegations regarding Sandrock fail to establish a "strong 

inference" of scienter as to even him, let alone as to any 

individual defendant. 

The only other "plausibly misleading" statement that 

concerns the drug's safety profile to which the plaintiffs point 

is one that, according to the complaint, Williams made in April of 
- 18 - 

2015. In it, Williams allegedly stated that "there's no real 

change in the benefit/risk profile of the drug for patients with 

MS. So it's pretty much status quo at the moment." 

By April of 2015, according to the complaint, Biogen had 

already disclosed the PML death and updated the drug's label to 

account for the increased understanding of its risk. Given that 

none of the findings by the researchers that the plaintiffs cite 

aver that the drug was less safe than these revised disclosures, 

we do not see how the plaintiffs can plausibly suggest that 

Williams was aware that the drug was less safe than these revised 

disclosures suggested. Therefore, even if, drawing all inferences 

in favor of the plaintiff, one could conclude that Williams's 

statement -- read in a vacuum -- was misleading, one could not 

draw a "strong inference" from that statement that it was said 

with an "intent to deceive," given what the record shows about 

Biogen's earlier disclosures and the state of Williams's knowledge 

of the drug's safety profile. See City of Dearborn Heights Act 

345 Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 760 

(1st Cir. 2011) ("[A]ttempts to provide investors with warnings of 

risks generally weaken the inference of scienter." (alteration in 

original) (quoting Ezra Charitable Tr. v. Tyco Int'l, Ltd., 466 

F.3d 1, 8 (1st Cir. 2006)). 

We turn, then, to the four "plausibly misleading" 

statements that pertain to Tecfidera's usage rates. All four 
- 19 - 

statements were allegedly made by Kingsley, who is an individual 

defendant. But, we find no basis for concluding that any of these 

statements permit us to infer the necessary intent to deceive that 

could suffice to create the "strong inference" of scienter that 

the PSLRA requires. And, even the cumulative weight of these 

statements and the CW evidence discussed below would not suffice. 

We first address the January 29, 2015 statement by 

Kingsley that "Tecfidera [was] on track to become the most 

prescribed therapy for MS worldwide." The plaintiffs argue that 

this statement was misleading and creates the "strong inference" 

of scienter on Kingsley's part, because at the time of the 

statement, Kingsley knew about both the PML death and about 

Tecfidera's declining sales and discontinuation rates. 

At the time that Kingsley made the statement, however, 

Biogen had already disclosed to the public the news of the PML 

death, had already changed the drug's label, had already publicized 

that it expected the drug's growth rate to "slow," and had already 

disclosed that the drug's discontinuation rates were higher than 

expected. Moreover, during the conference call on which Kingsley 

made the statement at issue, he also noted that the company had 

observed "moderating" growth for the drug at the end of 2014 and 

expected that trend to continue into the new year. Given these 

disclosures pointing against sales growth, it is hard to 

characterize Kingsley's statement that he believed Tecfidera would 
- 20 - 

"become the most-prescribed therapy for MS worldwide" as anything 

other than misguided optimism. See Fire & Police Pension Ass'n of 

Colo. v. Abiomed, Inc., 778 F.3d 228, 244 (1st Cir. 2015) (holding 

that defendants' informative disclosures "undercut any inference 

of scienter"). Accordingly, we fail to see how one could 

characterize Kingsley as having had the requisite intent to deceive 

when he made this statement, such that one could draw the "strong 

inference" of scienter required by the PSLRA. 

We, turn, then, to three statements of Kingsley's from 

January 29, 2015, to February 25, 2015, in which, according to the 

complaint, he stated that there had not been any "meaningful 

change" in Tecfidera's discontinuation rates and that those rates 

were "consistent with historical averages." As previously 

mentioned, at the time that Kingsley made these statements, the 

company had already disclosed to investors that Tecfidera's 

discontinuation rate was higher than Biogen would have hoped but 

that the company aimed to "get better performance in the 

discontinuation rates over a longer period of time." Given the 

statements in which Kingsley had been forthcoming about the status 

of Tecfidera's discontinuation rates, we do not see how Kingsley's 

early 2015 refrain that the company had not seen "meaningful 

change" in the drug's discontinuation rate and that the rates were 

"consistent with historical averages" may fairly be characterized 

as having been made with the "intent to deceive." Id. 
- 21 - 

In arguing otherwise, plaintiffs point to statements set 

forth in the complaint that were allegedly made by CWs. The 

complaint contains statements made by seventeen CWs regarding 

their observations on Tecfidera's sales, discontinuation rates, 

and safety profile. Ten of the seventeen CWs referenced in the 

complaint were also referenced in the complaint in Biogen I (CWs 

1-10).6 In addition to referring to seven new CWs (CWs 11-17), 

the Biogen II complaint also includes multiple new statements from 

four of the CWs (CWs 1, 3, 7, and 8) who were included in the 

original Biogen I complaint. 

In Biogen I, our Court found that none of the CWs' 

statements included in that complaint were probative of the 

defendants' scienter because they were imprecise, did not contain 

information that was directly communicated to the individual 

defendants, or concerned events that occurred after the individual 

defendants made the plausibly misleading statements at issue in 

that case. See Biogen I, 857 F.3d at 42-43. That logic applies 

with equal force here, insofar as the plaintiffs have reprised 

their argument that the statements by CWs set forth in the Biogen 

I complaint illustrate that Kingsley made his four plausibly 

misleading statements with the requisite scienter. 

 6 Of the seven "new" confidential witnesses included in the 

present complaint (CWs 11-17), two (CWs 11 and 12) were included 

in the Second Amended Complaint that our Court rejected as untimely 

in Biogen I. See Biogen I, 857 F.3d at 45-46. 
- 22 - 

As to the additional statements not included in the 

Biogen I complaint, the District Court similarly rejected them as 

not probative of the defendants' scienter because they failed to 

"set forth specific facts" that directly conflicted with the six 

"plausibly misleading" statements that the District Court 

highlighted. Biogen II, 305 F. Supp. 3d at 214-15 (emphasis in 

original). The District Court went on to note -- based on logic 

similar to that which we applied in Biogen I -- that these 

statements' relevance is further diminished by the fact that the 

complaint does not allege that any of the CWs ever spoke with any 

of the individual defendants or otherwise shared with them their 

observations. Id. at 215 n.29. 

On appeal, the plaintiffs do reference the statements of 

one CW in particular, CW 13. According to the plaintiffs, CW 13 

explained that "everyone in leadership had access to reporting 

metrics" and that leadership frequently monitored the "new start" 

rates for Tecfidera as part of the process for producing their 

sales projections. 

But, the fact that Biogen's leadership monitored 

Tecfidera's reporting metrics does not in and of itself suffice to 

create the "strong inference" that Kingsley made his four 

statements about Tecfidera's discontinuation rates with the 

requisite intent to deceive. We would expect responsible 

management to engage in such monitoring. As a result, before one 
- 23 - 

could infer what plaintiffs ask, one would need to know what 

Kingsley learned from such monitoring, and whether what he learned 

was at odds with any of his "plausibly misleading" statements. 

Yet, the complaint alleges no facts that are illuminating in that 

regard. 

The only additional confidential witness statement that 

the plaintiffs expressly reference in their brief's section on 

individual scienter is the statement made by CW 1. That witness 

allegedly said that Biogen instructed Area Business Managers to 

"downplay the significance of the PML death" when attempting to 

convince doctors to prescribe the drug. But, the complaint does 

not allege that Sandrock, Williams, or Kingsley was aware of this 

alleged instruction by the company. Nor do we see why such an 

instruction gives rise to an inference that Kingsley's public 

assessment of the drug's actual usage was inaccurate, let alone 

intentionally deceitful. 

As to the statements concerning safety, the plaintiffs 

do not dispute that Biogen disclosed the PML death to investors 

and the public. Moreover, nothing in CW 1's alleged statement 

reveals that what Sandrock and Williams actually said publicly 

about the drug's safety was known by them to be misleading. 

In their briefing to us, the plaintiffs expressly 

reference a number of other confidential witness statements to 

support their arguments that the three individual defendants 
- 24 - 

possessed the requisite scienter. But, the plaintiffs do not 

allege that any of the confidential witnesses who made these 

statements spoke with Kingsley before he made his statements about 

the discontinuation rates, and most of these confidential 

witnesses are, by the complaint's account, several levels removed 

from the company's executive team. See Biogen II, 305 F. Supp. 3d 

at 215 n.29 ("The complaint does not allege that any of 

the . . . confidential witnesses ever spoke with one of the named 

defendants."); see also Fire & Police Pension Ass'n of Colo., 778 

F.3d at 245 (noting that "none of the witnesses were in senior 

management positions, and they appear to have had relatively little 

ongoing contact with senior management" (internal quotations 

omitted)). 

B. 

The plaintiffs do separately argue that they can meet 

their burden to allege that Biogen (though, we presume, not any of 

the individual defendants) had the requisite scienter under a 

theory of "corporate scienter." Specifically, the plaintiffs 

contend that, if the complaint plausibly alleges that one of the 

company's employees made a misleading statement to investors 

without scienter and "an individual within Biogen’s management 

team . . . knew or had access to information" that showed that 

this misleading statement was not true, then Biogen can be found 

to have had the requisite scienter on a corporate scienter theory. 
- 25 - 

The plaintiffs then proceed to contend that the record provides 

support for finding a "strong inference" of scienter on this basis, 

in light of the six "plausibly misleading" statements in the 

complaint that we have just reviewed, the company's failure to 

correct them, and the allegations that the complaint sets forth 

regarding what persons within the company knew or what the company 

may itself be charged with having known. And, the plaintiffs 

further contend, the District Court erred by failing even to 

address this basis for finding scienter vis à vis the claims 

against Biogen. 

The plaintiffs attempt to make the case for their showing 

of corporate scienter as follows. They allege that Ferguson and 

Hall knew, due to their conversation with Dr. Thrower, that 

Tecfidera was less safe than the company stated publicly when 

Sandrock said that "Tecfidera continues to provide patients with 

effective oral treatment for MS that is supported by a growing 

body of data reinforcing its benefits and favorable safety 

profile," and when Williams said that "there's no real change in 

the benefit/risk profile of the drug for patients with MS. So 

it's pretty much status quo at the moment." The plaintiffs argue 

that Ferguson and Hall may be understood to have had this knowledge 

because, as the complaint alleges, Dr. Thrower discussed with 

Ferguson and Hall his research that Tecfidera could cause lower 

lymphocyte counts than the company originally disclosed. 
- 26 - 

But, the fact that Dr. Thrower and researchers like Dr. 

Zamvil concluded on the basis of their own research that Tecfidera 

could cause lower lymphocyte counts than was originally understood 

does not, in and of itself, suffice to contradict the assertions 

that Tecfidera was "effective" at treating MS and that this fact 

was "supported by a growing body of research." For that reason, 

even if we were to assume that the statement was plausibly 

misleading and that Hall's and Ferguson's knowledge of Dr. 

Thrower's research -- or any of the other research cited by the 

plaintiffs -- could be imputed to the company as a whole, that 

knowledge would still fail to create the "strong inference" of 

scienter on Biogen's part. That is so, we emphasize, even if we 

were to accept the plaintiffs' theory of corporate scienter. 

Similarly, the plaintiffs argue that Dr. Thrower's 

statements to Hall and Ferguson show that the company knew that 

the drug's usage rates were lower than was publicized. But, we 

fail to see how the knowledge that one doctor -- whose patients 

constituted less than 0.2% of all Tecfidera users -- would no 

longer prescribe Tecfidera could suffice to show that the company 

understood the drug's usage rate to be at odds with any statement 

regarding its usage that had been made publicly. For that reason, 

once again, Ferguson and Hall's knowledge of what Dr. Thrower had 

allegedly told them about his own experience with the drug does 

not suffice to establish the "strong inference" of scienter, even 
- 27 - 

if we were inclined to impute what Ferguson and Hall knew to the 

company overall in the way that the plaintiffs contend that we 

must under their expansive theory of "corporate scienter."7 

The plaintiffs also point to statements made by the 

confidential witnesses to support their contention that the 

complaint adequately alleges that employees in the company knew 

that the statements by Kingsley that the District Court found to 

be "plausibly misleading" were untrue. They then proceed to argue 

from that contention that the complaint's allegations suffice to 

create a "strong inference" of scienter on the company's part, in 

consequence of Kingsley's plausibly misleading statements 

regarding the drug's usage. But, the alleged statements at issue 

either were not made with sufficient particularity, see Biogen I, 

875 F.3d at 42 (noting that the confidential witness statements 

did not "quantify the magnitude of the sales decline at the company 

level. [Nor did they] explain with any precision" the cause of 

 7 Plaintiffs' reliance on CW 12's statements as evidence of 

corporate scienter does little to strengthen their position. 

According to the plaintiffs, Craig Brown, Biogen's Regional 

Director, noted that CW 12's regional sales numbers declined after 

Dr. Thrower stopped prescribing Tecfidera to his patients. This 

statement simply speaks to the fact that individuals in the company 

were aware that, at least for a time, Dr. Thrower's decision would 

have an impact on their sales in the Atlanta region where CW 12 

was stationed. CW 12's observation does not indicate that anyone 

in the company knew Kingsley's statements about Tecfidera's 

discontinuation rate nationally were in any way untrue such that 

those observations would create the "strong inference" of scienter 

necessary to survive a motion to dismiss under the PSLRA. 
- 28 - 

the decline in sale) or did not describe events that took place 

before Kingsley's three statements concerning the drug's 

discontinuation rates, see id. at 42-43 (describing "a significant 

timing problem" with many of the confidential witness statements, 

as most of them described declines in Tecfidera sale that occurred 

after Kingsley made the three plausibly misleading statements at 

issue here). 

For example, plaintiffs reference the statements made by 

CW 11 that Biogen was aware that Tecfidera sales would decline 

after the PML death was announced and "drastically lowered sales 

targets for the drug." But, the plaintiffs never explain how 

reductions in sales targets in November of 2014 indicate that that 

anyone in the company was aware that discontinuation rates were 

higher than Kingsley's statements indicated in early 2015. After 

all, the fact that the company reduced sales targets does not, 

necessarily, mean that actual sales fell at a commensurate rate. 

Accordingly, while these statements do indicate that employees in 

the company were concerned about the impact the PML death would 

have on Tecfidera sales, they do not create a "strong inference" 

that someone in the company's management team knew that Kingsley's 

generalized statements about the drug's discontinuation rates were 

untrue. 

Similarly, CW 14's statements that there were "lots of 

discontinuations" in the New York region after the PML death was 
- 29 - 

announced do not suffice to support the plaintiffs attempt to show 

that the District Court erred in dismissing the claims against 

Biogen. The fact that one employee observed an unspecified 

increase in discontinuation rates in New York in November of 2014 

does not create a strong inference that the Biogen management team 

knew that Kingsley's early 2015 statements about the drug's 

discontinuation rates company-wide were untrue. In fact, 

according to the complaint, at the time that Kingsley made those 

statements, the company had already disclosed to investors that 

the drug's discontinuation rates were higher than expected. 

Finally, the plaintiffs point to CW 1's statement about 

having participated in "emergency" conference calls in December of 

2014 and January of 2015 regarding Tecfidera's declining sales. 

But, the plaintiffs do not describe what specifically was 

communicated to the employees during those calls, and nothing in 

the complaint suggests that CW 1 received any information during 

them that directly conflicted with the four "plausibly misleading" 

statements attributed to Kingsley. 

Moreover, the few confidential witness statements 

alleged in the complaint that were particularized and 

appropriately timed concerned narrow slices of the market for the 

sale of the drug. For example, CW 17 -- an Executive Territory 

Business Manager -- reported that his Tecfidera sales dropped 25% 

after the PML death. But, the fact that his individual sales 
- 30 - 

experienced a decline does not indicate that he knew that 

Kingsley's generalized assessments of the magnitude of the change 

in discontinuation rates nationally for the company were untrue.8 

C. 

Finally, we address the plaintiffs "additional scienter" 

arguments. Here, the plaintiffs argue that the District Court did 

not properly credit their allegations that the defendants knew or 

should have known that the public statements that had been made by 

Kingsley regarding Tecfidera were misleading because Tecfidera was 

part of the company's "core operations"; many of the plausibly 

misleading statements were "repeated" and "specific"; and Biogen 

operates in a highly regulated industry. We disagree.9 

 8 The plaintiffs additionally point to CW 15's and CW 16's 

knowledge that the company had prepared a response to a PML-linked 

death well in advance of the October 2014 announcement. According 

to the plaintiffs, the fact that the company did so reveals that 

the company knew for some time that the drug could cause PML and 

yet failed to acknowledge this reality in its public disclosures. 

However, as stated previously with regard to the plaintiffs' 

individual scienter claims, we fail to see how a company's 

preparation for a worst-case scenario indicates that the company 

knew that such a scenario would come to pass. Consequently, we 

similarly reject the plaintiffs' reliance on CW 15's and CW 16's 

statements as they pertain to their corporate scienter 

contentions, as we conclude that even if we were to impute CW 15's 

and CW 16's knowledge to the company, the plaintiffs would still 

fail to create a "strong inference" of scienter. 

9 Plaintiffs also argue that, because only a short period of 

time passed between the defendants' "plausibly misleading" 

statements and the fraud's alleged "disclosure," it can be assumed 

that the plaintiffs knew that their statements were misleading at 

the time that they were made. However, it appears that the 

plaintiffs did not make this argument to the District Court below, 
- 31 - 

In pressing the "core operations" theory, the plaintiffs 

contend that, when "facts critical to a business’s core operations 

or an important transaction generally are so apparent[,] knowledge 

[of those facts] may be attributed to the company and its key 

officers," even if those officers did not, in actuality, know the 

critical information. Bodri v. GoPro, Inc., 252 F. Supp. 3d 912, 

932 (N.D. Cal. 2017). But, as we have explained, the plaintiffs 

fail to identify any allegations in the complaint that show that 

anyone in the company had knowledge regarding the drug's safety 

profile and sales that contradicted the company's public 

representations. So, the "core operations" theory also does little 

to aid the plaintiffs' case. S. Ferry LP, No. 2 v. Killinger, 542 

F.3d 776, 784-85 (9th Cir. 2008) ("As a general matter, 'corporate 

management's general awareness of the day-to-day workings of the 

company's business does not establish scienter -- at least absent 

some additional allegation of specific information conveyed to 

management and related to the fraud' or other allegations 

supporting scienter." (quoting Metzler Inv. GmbH v. Corinthian 

Colls., Inc., 534 F.3d 1068, 1087 (9th Cir. 2008))). 

In this regard, the precedents on which the plaintiffs 

rely -- see, e.g., Stratte-McClure v. Morgan Stanley, 784 F. Supp. 

2d 373, 389 (S.D.N.Y. 2011); Crowell v. Ionics, Inc., 343 F. Supp. 

 

and we thus do not consider it. See United States v. Swiss American 

Bank, Ltd., 191 F.3d 30, 37 (1st Cir. 1999). 
- 32 - 

2d 1, 19 (D. Mass. 2004) -- are distinguishable. In each, the 

record contained much stronger evidence of knowledge within the 

company of fraudulent practices than is set forth in the 

allegations in the plaintiffs' complaint here. Compare Crowell, 

343 F. Supp. 2d at 19 (explaining that the low-level witnesses had 

received an email stating that a mid-level vice president ordered 

a company-wide practice of fraudulently inflating sales numbers 

and thus that, even if the corporate officers were personally 

unaware of the fraudulent sales practice, generally -- that 

knowledge could be imputed to them though the core operations 

theory), with Lenartz v. Am. Superconductor Corp., 879 F. Supp. 2d 

167, 183 n.9 (D. Mass. 2012) (rejecting the plaintiffs' core 

operations theory where the facts offered to prove that the 

defendant's actions were fraudulent were "less clear" than the 

"particularized facts" of Crowell). 

The plaintiffs' "highly regulated industry" theory 

suffers from the same defect. According to the plaintiffs, because 

"Biogen operates in the heavily regulated pharmaceuticals 

industry," one can infer "that the Individual Defendants were 

acutely aware of safety-related concerns [related to Tecfidera]." 

But, if by "safety concerns" the plaintiffs mean the alleged 

statements from Dr. Thrower to Ferguson and Hall regarding Dr. 

Thrower's research on Tecfidera, then we have already explained 

the problem with this theory. Even if we were to assume that the 
- 33 - 

individual defendants were aware of Dr. Thrower's comments to 

Ferguson and Hall, none of the six "plausibly misleading" 

statements so clearly conflicts with Dr. Thrower's assessment of 

the drug -- especially given the other safety disclosures the 

company made prior to those statements -- that there exists a 

"strong inference" that any of those six statements were made with 

the intent to deceive. 

Nor can the plaintiffs succeed in pressing their case on 

appeal based on their contention that the defendants' repeated 

specific statements about the drug show that they knew that their 

public disclosures were misleading when made and thus that there 

is a "strong inference" of scienter not only as to them but also 

as to Biogen. We may assume that a plausibly misleading statement 

was made publicly more than once. But nothing in the complaint 

alleges facts that indicate that anyone in Biogen's management had 

knowledge that was sufficiently in conflict with any of the six 

"plausibly misleading" public statements to permit the conclusion 

that the company had the requisite intent to deceive in permitting 

those statements to have been made and in not having corrected 

them in some respect. 

IV. 

For the foregoing reasons we affirm the District Court's 

judgment granting the motion to dismiss.