United States Court of Appeals

For the First Circuit

No. 23-1393

JULIAN QUINONES, individually and on behalf of all others 

similarly situated,

Plaintiff, Appellant,

PAUL EVANS, individually and on behalf of all others similarly 

situated; MICHAEL HINGSTON, individually and on behalf of all 

others similarly situated,

Plaintiffs,

v.

FREQUENCY THERAPEUTICS, INC.; DAVID L. LUCCHINO; CARL LEBEL,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

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

Before

Kayatta, Selya, and Howard,

Circuit Judges.

Amanda F. Lawrence, with whom Thomas L. Laughlin, IV and Scott 

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

Roman Martinez, with whom William J. Trach, Christine C. 

Smith, Jeff G. Hammel, Kevin M. McDonough, and Latham & Watkins 

LLP were on brief, for appellees. 
July 2, 2024
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KAYATTA, Circuit Judge. Frequency Therapeutics is a 

biotechnology start-up that tried to develop a treatment called 

"FX-322" for individuals suffering from severe sensorineural 

hearing loss. While initial clinical trials of FX-322 were 

positive, subsequent testing produced disappointing results. When 

announced, those results triggered a sharp drop in the price of 

Frequency's publicly traded stock. That, in turn, led three 

stockholders to file this putative class action seeking recourse 

for alleged violations of sections 10(b) and 20(a) of the 

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

and Securities and Exchange Commission Rule 10b-5. 

Plaintiffs claim that Frequency's Chief Executive 

Officer, David Lucchino, and its Chief Development Officer, Carl 

LeBel, knew of problems with the study before the results were 

announced, yet gave investors assurances to the contrary. The 

district court dismissed the complaint for failing to allege 

sufficient facts to support a finding of scienter under the Private 

Securities Litigation Reform Act ("PSLRA") § 21D(b), 15 U.S.C. 

§ 78u-4(b). We agree and affirm the dismissal. 

I.

On a motion to dismiss, "we accept the factual 

allegations set forth" in the complaint, "as 'supplemented by 

certain materials the defendants filed in the district court in 

support of their motion to dismiss.'" Constr. Indus. & Laborers 
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Joint Pension Tr. v. Carbonite, Inc., 22 F.4th 1, 4 (1st Cir. 2021) 

(quoting Mehta v. Ocular Therapeutix, Inc., 955 F.3d 194, 198 (1st 

Cir. 2020)). Initial trials of FX-322 indicated that the treatment 

was "likely safe and may have a beneficial effect on patients." 

So in October 2019, Frequency announced that it would be launching 

a Phase 2a trial of FX-322 with a wider study population. To guard 

against the possibility of bias in the Phase 2a trial, Frequency 

kept confidential certain participation eligibility requirements. 

It made a particular point of not disclosing how poorly a person 

would need to score on a word-recognition test to qualify for the 

study. The concern was that persons who knew the qualifying 

threshold might manipulate their results on the eligibility test 

to get into the study, and then -- when tested at the end -- show 

a marked "improvement" in hearing that was not actually a real 

change.

Frequency's concern was not farfetched. Some tinnitus 

patients apparently believed that FX-322 could help alleviate 

their condition. They were therefore eager to gain early access 

to the treatment through clinical trials even though they might 

not otherwise have met the study participation criteria. So when 

a user on Tinnitus Talk -- an online forum for people with tinnitus 

-- posted in February 2020 that a patient would need to score less 

than eighty-five percent on a word-recognition test to qualify for 

the trial, at least some individuals used that information to fake 
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their way into the study. Thus, plaintiffs allege, by the time 

Frequency completed its Phase 2a recruitment in September 2020, at 

least some study participants were fraudulent enrollees. 

Subsequent analysis of the Phase 2a trial did not 

produce statistically significant results. On March 23, 2021, 

Frequency issued a press release announcing that FX-322 "did not 

demonstrate improvements in hearing measures versus placebo," and 

explained that the lackluster results of the Phase 2a study 

"potentially suggest[ed] bias due to trial design." In the 

aftermath of the announcement, Frequency stock plummeted from 

$36.29 per share to $7.99 per share.

Plaintiffs filed their initial complaint on June 3, 

2021, and the operative amended complaint on May 16, 2022. They 

asserted causes of action under sections 10(b) and 20(a) of the

Securities and Exchange Act, alleging that defendants knowingly 

misrepresented the experimental validity of the Phase 2a trial to 

investors in order to inflate Frequency stock prices. As relevant 

to this appeal the complaint described two occasions when Frequency 

officers touted the study design. First on October 29, 2020, 

Frequency representatives stated in a presentation to investors 

that Phase 2a was a "double-blind, placebo-controlled, multicenter" study of adults, all of whom "have meaningful word 

recognition deficits." Second on January 11, 2021, Frequency 

reiterated in another investor presentation that "all subjects 
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have meaningful word recognition deficits" as required by the 

Phase 2a entrance criteria.

The district court agreed that the statements made on 

October 29, 2020, and January 11, 2021, could be found to be 

materially false, misleading, incomplete, or inaccurate. See

Quinones v. Frequency Therapeutics, Inc., 665 F. Supp. 3d 156, 

167-69 (D. Mass. 2023). It therefore viewed the pivotal question 

as one of scienter: Did defendants know of or recklessly disregard 

the falsity of the statements when they made them?

To prove scienter, plaintiffs relied on three categories 

of evidence. First, they pointed to statements from a confidential 

witness ("CW1") who worked as a Senior Manager of Clinical 

Operations at Frequency from January 2018 to September 2021. CW1 

stated that defendants "must have . . . known" that the 

confidential Phase 2a participation criteria "were being 

disseminated online via online posts." CW1 additionally reported 

that clinicians who helped administer the drug to Phase 2a trial 

participants told LeBel about a "concerning discrepancy between 

certain patients' responses during the screening process for 

admission into Phase 2a and subsequent examinations by the 

investigators." And so, say plaintiffs, by December 2020, 

defendants "already knew that Phase 2a was hopelessly biased." 

Second, plaintiffs highlighted the cadence of CEO Lucchino's stock 

sales during the pendency of the Phase 2a trial. From December 
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2020 (when the first batch of study data was collected) through 

February 2021, Lucchino averaged over 57,000 shares sold per month 

compared with the 15,000 shares per month he had been selling 

previously. Third, plaintiffs emphasized that FX-322 was 

essential to Frequency's commercial success, and as such 

defendants would have been paying close attention to the Phase 2a 

trial. 

The district court was not persuaded. It concluded that 

the complaint failed to demonstrate that defendants had made the 

false statements with the degree of scienter required to state a

Securities and Exchange Act claim and dismissed the case. Id. at 

162. 

Plaintiffs subsequently filed a notice of appeal. About 

three months later, they filed in the district court a motion for 

leave to file a second amended complaint. The second amended 

complaint contained allegations from additional confidential 

witnesses, which plaintiffs asserted would cure any deficiencies 

identified in the district court's dismissal order. The district 

court denied the motion, reasoning that because the case had been 

appealed, the court "ha[d] no business now volunteering its views 

about post-decision events."

II.

We review de novo a district court's dismissal of a 

securities fraud complaint for failure to state a claim under 
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Rule 12(b)(6). Carbonite, Inc., 22 F.4th at 6. To state a claim 

under section 10(b), a complaint must allege: "(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." In re Biogen Inc. Sec. Litig., 857 

F.3d 34, 41 (1st Cir. 2017) (citing Fire & Police Pension Ass'n of 

Colo. v. Abiomed, Inc., 778 F.3d 228, 240 (1st Cir. 2015)).

A.

Frequency first asks us to backtrack, arguing that the 

district court was overly generous to plaintiffs in finding that 

plaintiffs had adequately alleged a false statement. We disagree. 

The complaint alleges that CW1 "confirmed that multiple patients 

enrolled in Phase 2a . . . despite not having met the inclusion 

criteria" by "fak[ing] being deaf." Taking that as true, 

Frequency's subsequent statements to investors representing that 

all Phase 2a trial participants had "meaningful word recognition 

deficits" are necessarily false. Therefore, like the district 

court, we train our attention on the issue of scienter.

B.

To support a finding of scienter under the PSLRA, a 

complaint must "state with particularity facts giving rise to a 

strong inference that the defendant . . . either . . . consciously 

intended to defraud, or that they acted with a high degree of 

recklessness." Mehta, 955 F.3d at 206 (quoting 15 U.S.C. 
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§ 78u-4(b)(2)(A) and Kader v. Sarepta Therapeutics, Inc., 887 F.3d 

48, 57 (1st Cir. 2018)). A "strong" inference is "more than merely 

'reasonable' or 'permissible' -- it must be cogent and compelling, 

thus strong in light of other explanations." Tellabs, Inc. v. 

Makor Issues & Rts., Ltd., 551 U.S. 308, 323-24 (2007). In 

considering whether a complaint has alleged enough facts to survive 

a motion to dismiss under these heightened pleading standards, 

"courts must . . . accept all factual allegations in the complaint 

as true," but "[a] complaint will survive . . . only if a 

reasonable person would deem the inference of scienter cogent and 

at least as compelling as any opposing inference one could draw 

from the facts alleged." Id. at 322, 324. 

Plaintiffs contend that defendants were reckless in 

ignoring signs that the Phase 2a trial might be infected with bias. 

First, they point to CW1's allegations that clinicians told LeBel 

about certain participants who at the beginning of the study 

reported not being able to hear certain sounds, then at the end 

told clinicians they could hear those same sounds. This 

information apparently should have tipped LeBel off to the 

possibility of bias within the study design. But plaintiffs do 

not allege when the clinicians conveyed that information to LeBel. 

Moreover, plaintiffs do not explain why reports of improved hearing 

would be a concern unless the individuals making the reports were 

in the placebo group. Given that the study was double-blind, even 
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the clinicians could not have known which participants were in 

that group until the end of December. Recall that earlier trials 

of FX-322 produced promising results. So the minimal allegations 

in the complaint do not allow us to fault anyone for seeing the 

initial Phase 2a trial data and thinking that participants with 

improved hearing were in the treatment group. 

That does leave open the possibility that the final study 

results revealing the problems with the study were conveyed to 

LeBel prior to his January 11, 2021 investor presentation. But 

even plaintiffs' confidential witness offers no actual fact that 

would create a strong inference that defendants knew of the study 

results by January 11, 2021 (much less by the time of the earlier 

challenged statements on October 29, 2020). Like Conan Doyle's 

dog that did not bark, this silence says much. See In re Ariad 

Pharms., Inc. Sec. Litig., 842 F.3d 744, 751 (1st Cir. 2016)

(noting that plaintiffs' failure to "allege any specific facts 

about when the defendants learned of these adverse events" was "a 

glaring omission"); see also In re Biogen Inc. Sec. Litig., 857 

F.3d at 43 (finding that where statements from confidential 

witnesses do not "go specifically to what the defendants knew at 

the time they made [the misleading] statements," then they are 

insufficient to establish scienter).

Plaintiffs respond that because LeBel went on the 

Tinnitus Talk podcast in July 2020, he must have known about (or 
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recklessly disregarded) the forum post revealing the study's wordrecognition criteria even before the study began. But the 

complaint is silent as to why LeBel would or should have discovered 

the post when he participated in the interview. Merely alleging 

that a person went on a podcast associated with a website does not 

by itself generate a strong inference that the person reviewed 

prior posts on that website. As our case law makes clear, "fraud 

cannot be established by hindsight." Shash v. Biogen, Inc., 84 

F.4th 1, 16 (1st Cir. 2023). 

The complaint does allege that CW1, a senior manager who 

helped oversee the Phase 2a study, was in a good position to know 

about potential issues with the study. But it contains no 

allegations that CW1 said anything to LeBel -- with whom CW1 worked 

"hand-in-hand" -- about any concerns.

Nor do any of plaintiffs' other allegations support a 

finding of scienter. Plaintiffs attempt to rely on the sudden 

increase in Lucchino's sales of Frequency stocks from December 

2020 to February 2021, right before Frequency made its announcement 

that the Phase 2a trial had been a bust. But all of plaintiffs' 

claims as to knowledge of the study's flaws are specific only to 

LeBel -- who is not alleged to have engaged in any inconsistent 

stock activity during the relevant period. "'[E]ven unusual sales 

by one insider do not give rise to a strong inference of scienter' 

when other insiders ha[ve] not engaged in suspicious trading during 
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the class period." N.J. Carpenters Pension & Annuity Funds v. 

Biogen IDEC Inc., 537 F.3d 35, 56 (1st Cir. 2008) (quoting Abrams

v. Baker Hughes Inc., 292 F.3d 424, 435 (5th Cir. 2002)); see also

Local N. 8 IBEW Ret. Plan & Tr. v. Vertex Pharms., Inc., 838 F.3d 

76, 84-85 (1st Cir. 2016) (finding that an increase in stock sales 

by some defendants did not prove scienter where other defendants 

did not engage in inconsistent trading patterns and complaint 

offered no reason why only certain defendants would know of 

negative study results).

Moreover, while it is true that Lucchino sold stock, he 

sold only fifteen percent of his shares, and at the same time 

received additional shares in the company as part of his 

compensation. So on the whole, he did not reduce his investment 

in the company by enough to allow for the strong inference of 

scienter claimed by plaintiffs. See City of Dearborn Heights Act 

345 Police & Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 761 

(1st Cir. 2011) (noting that a court can "consider[] both shares

and vested stock options in determining the significance of a sale"

(citation omitted)). When a defendant keeps the "vast majority" 

of their holdings, the "strength of the insider trading allegations 

drifts toward the marginal end." Brennan v. Zafgen, Inc., 853 

F.3d 606, 615-16 (1st Cir. 2017) (discussing an allegation that 

defendants had kept at least eighty-five percent of their stock 

holdings). We agree with plaintiffs that fifteen percent is not 
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a talismanic number below which any defendant is immune from claims

of fraud. But we are also cognizant that "while . . . insider 

trading may be 'probative of scienter,' it is not sufficient to 

establish an inference of scienter on its own." In re Ariad 

Pharms., Inc. Sec. Litig., 842 F.3d at 754 (quoting Greebel v. FTP 

Software, Inc., 194 F.3d 185, 197-98 (1st Cir. 1999)).

Plaintiffs additionally point out that because FX-322 

was Frequency's "core" product, defendants must have known about 

the problems with the Phase 2a study population. Certainly the 

importance of FX-322 to the company makes it reasonable to think 

that senior management paid attention to what they were told about 

the study, and would have been curious to know the results. 

Carbonite, 22 F. 4th at 9. But in this case, that importance 

provides no sufficient basis for determining when and what senior 

management were told, at least within the narrow timeframes at 

issue here. See id. at 9-10 (noting that the complaint must allege 

facts strongly suggesting that increased attention to a product 

exposed senior management to any incongruity); see also Auto. 

Indus. Pension Tr. Fund v. Textron Inc., 682 F.3d 34, 40 (1st Cir. 

2012) (observing that plaintiff's allegation that "survival of the 

company [was] on the line" was "hardly the particularized showing 

required by the PSLRA").

Plaintiffs insist that the totality of the other 

evidence supports the conclusion that defendants must have known 
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about the flaws in the Phase 2a trial before they made the 

statements at issue. They argue that CW1's allegations coupled 

with Lucchino's stock sales "strongly suggest" that defendants' 

close attention to FX-322 "exposed them to information that either 

rendered their public statements false or necessarily invited 

further investigation." Carbonite, 22 F.4th at 9-10. But in 

Carbonite, the complaint alleged that employees had reported 

problems with the product before the false statements were made. 

Id. at 10. Moreover, none of the preceding product tests had been 

successful. Id. In contrast, previous trials of FX-322 had 

delivered promising results. And critically, none of CW1's 

allegations are specific as to whether defendants learned of 

testing discrepancies before they made the statements at issue. 

Plaintiffs' "core-operations" argument therefore hardly becomes

more convincing when coupled only with unspecific claims about 

when and how defendants learned that the Phase 2a trial might have 

been contaminated. See Metzler Asset Mgmt. GmbH v. Kingsley, 928 

F.3d 151, 165 (1st Cir. 2019).

At base, plaintiffs fault the district court for failing 

to consider whether "all of the facts alleged, taken collectively, 

give rise to a strong inference of scienter." Tellabs, Inc., 551 

U.S. at 323. Certainly while "'[e]ach individual fact about 

scienter may provide only a brushstroke,' . . . our obligation 

[is] to consider 'the resulting portrait.'" Vertex Pharms., Inc., 
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838 F.3d at 81 (first alteration in original) (quoting In re 

Cabletron Sys., Inc., 311 F.3d 11, 40 (1st Cir. 2002)). At the 

same time plaintiffs cannot amalgamate a series of sketchy

brushstrokes and call it a van Gogh. The PSLRA dictates that to 

survive a motion to dismiss, "[a]n inference of scienter" must be 

"cogent and at least as compelling as any opposing inference one 

could draw from the facts alleged." In re Genzyme Corp. Sec. 

Litig., 754 F.3d 31, 40 (1st Cir. 2014) (quoting Tellabs, Inc., 

551 U.S. at 324). Viewing the complaint in its totality, we do 

not conclude that it meets this standard. We accordingly affirm 

the district court's dismissal of the complaint on its merits.1

Finally, plaintiffs contend that they now have the 

benefit of additional and previously unavailable witnesses whose 

testimony can make clear that Frequency's senior officers knew of 

the Phase 2a study's flaw before making the challenged statements. 

However, any Rule 60 motion, as well as any Rule 15(a) motion, 

should be presented first to the district court after this appeal 

is concluded and the case remanded. We express no opinion at all 

concerning the disposition of any such motion.

1 Because a section 20(a) claim is "derivative" of a 

section 10(b) claim, see Textron Inc., 682 F.3d at 36 n.2, it 

cannot stand where there is no underlying section 10(b) violation, 

ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 67-68 (1st Cir. 

2008). 
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III.

We therefore affirm the judgment of the district court.