Opinion ID: 6112407
Heading Depth: 2
Heading Rank: 1

Heading: False or Misleading Statements

Text: The District Court correctly concluded that Plaintiff failed to sufficiently plead an actionable material misrepresentation or omission. We address each of the four statements in turn. 1. Physiologically normal and virtually painless In two different press releases, Antares stated that Xyosted can provide patients with “physiologically normal and steady levels of testosterone over the course of therapy” and a “virtually painless treatment experience as demonstrated by the pain data collected.”9 Plaintiff contends that these statements were false or misleading because the clinical data did not substantiate “physiologically normal” outcomes or a “virtually painless treatment experience” as the data included one case of completed suicide, one 9 App. 159–61. 7 case of attempted suicide, two cases of depression, and a clear tendency towards a high rate of hypertension. Contrary to plaintiff’s assertion, the occurrence of hypertension, suicide, or depression do not render false or misleading Antares’s statements about the treatment pain experienced by patients, or the levels of testosterone administered over the course of therapy. Potential adverse reactions to Xyosted are not implicated by either statement. These statements are not actionable. 2. Incidence ≥5% and one case of each In annual and quarterly company filings, as well as one press release, Antares stated that, in its first clinical study, “[t]he most common adverse reactions (incidence ≥5%) . . . were[, among other things,] increased . . . hypertension[.]”10 Antares also stated that, for the first clinical study, the “[s]erious adverse events . . . reported included one case each of worsening depression, vertigo[,] and suicide.”11 Plaintiff contends that these statements were false or misleading because (1) the clinical studies showed a clear tendency towards a high risk of hypertension; (2) the first clinical study showed a hypertension rate more than 200% higher than comparable, approved testosterone replacement therapies, which was obscured by listing hypertension among the other adverse effects as merely ≥5%; (3) the risk of suicide was far greater than with any other currently marketed testosterone replacement therapies; and (4) an additional suicide attempt and case of depression were not disclosed. 10 App. 161–67. 11 Id. 8 First, the risk of hypertension was disclosed. See Cal. Pub. Emps.’s Ret. Sys. v. Chubb Corp., 394 F.3d 126, 156 (3d Cir. 2004) (holding that plaintiffs failed to meet the threshold pleading requirements where the allegedly false or misleading statements were actually disclosed). Indeed, as shown above, hypertension was listed among the most common adverse reactions. Second, Plaintiff fails to point to any duty of Antares to disclose the rate of hypertension, suicide, or any other adverse reaction as compared to other testosterone replacement therapies. See Matrixx Initiatives, 563 U.S. at 45 (“Silence, absent a duty to disclose, is not misleading under Rule 10b-5.”) (quoting Basic, 485 U.S. at 239 n.17); Oran v. Stafford, 226 F.3d 275, 285 (3d Cir. 2000) (“Even non-disclosure of material information will not give rise to liability under Rule 10b-5 unless the defendant had an affirmative duty to disclose that information.”). Similarly, including the risk of hypertension among the other six common adverse events as ≥5% was not misleading. Plaintiff has not pled facts showing that the rate of hypertension observed was significantly higher than these other adverse events. And although Plaintiff may have wanted to know how much greater than 5% the risk of hypertension was, Antares had no duty to disclose the exact statistical risk of any adverse event and its disclosure was factually accurate. Last, we turn to the allegedly undisclosed incidences of attempted suicide and depression. As an initial matter, the adverse reaction/event disclosures above relate to only the first clinical study, not both. But Plaintiff’s complaint alleges that (1) “an 9 additional suicide attempt . . . occurred during the [Xyosted] clinical studies”;12 and (2) “the [Xyosted] clinical studies included two cases of depression, not one.”13 As noted by the District Court, Plaintiff fails to show how these statements misrepresent the observed incidence of suicide and depression in this one Phase 3 study. One allegation, however, does limit itself to the first clinical study. See App. 167 (“[The first clinical study] had included two cases of depression, not one . . . .”). But the complaint just alleges that the additional case of depression occurred, not that Xyosted caused this event. This is not enough. The “mere existence of reports of adverse events,” without some indication that the drug at issue caused those events, does not satisfy Basic’s “total mix” materiality standard. Matrixx Initiatives, 563 U.S. at 44, 42–43 (“Adverse event reports are daily events in the pharmaceutical industry . . . .”). More critically, the FDA’s clinical review of Xyosted—which Plaintiff himself expressly referenced and relied upon in the complaint—cuts against Plaintiff’s own argument.14 Specifically, the clinical review noted that, in the first clinical study, the only serious adverse events were (1) a case of completed suicide, (2) a case of worsening depression, and (3) a case of moderate vertigo. Supp. App. 426. Although Antares conceded that the case of completed suicide may have had its roots in depression, see Supp. App. 424–25, it was neither false nor misleading to categorize the event as a 12 App. 162–63 (emphasis added), 165 (emphasis added), 167 (emphasis added). 13 App. 162–63 (emphasis added), 165 (emphasis added). 14 When an allegation in the complaint is contradicted by a document incorporated in it by reference, the document controls and the allegation is not accepted as true. See, e.g., ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 n.8 (3d Cir. 1994); Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 147 (2d Cir. 2011). 10 completed suicide. Indeed, the correlative relationship between depression and suicide is so commonplace that no reasonable investor would be materially misled by a disclosure of a completed suicide that omitted that the person who died of suicide was also depressed.15 Thus, Plaintiff’s allegation about the allegedly undisclosed occurrence of depression is not actionable. See Winer Fam. Tr. v. Queen, 503 F.3d 319, 330 (3d Cir. 2007) (“Liability may exist under Rule 10b–5 for misleading or untrue statements, but not for statements that are simply incomplete.”); Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002) (“Rule 10b–5 . . . prohibit[s] only misleading and untrue statements, not statements that are incomplete . . . . Often, a statement will not mislead even if it is incomplete or does not include all relevant facts.”) (emphasis in original and internal citation omitted). 3. Nothing unusual While on a quarterly earnings conference call with an analyst, CEO Apple stated that “nothing unusual” occurred with the FDA’s review of Xyosted.16 Plaintiff contends that this statement was false or misleading because the FDA told Defendants in late 2016 15 See, e.g., Colacicco v. Apotex Inc., 521 F.3d 253, 257 (3d Cir. 2008) (quoting a warning from the FDA stating: “The possibility of a suicide attempt is inherent in depression”), cert. granted, judgment vacated on other grounds, 556 U.S. 1101 (2009); Dolin v. GlaxoSmithKline LLC, 901 F.3d 803, 807 (7th Cir. 2018) (same); In re Neurontin Mktg., Sales Pracs. & Prods. Liab. Litig., 612 F. Supp. 2d 116, 157 n.70 (D. Mass. 2009) (“It is . . . well-established and undisputed that depression is a risk factor for suicide.”) (citing González–Maeso, Neurotransmitter Receptor-Mediated Activation of G-Proteins in Brains of Suicide Victims with Mood Disorders, 7 Molecular Psychiatry, 755, 762 (2002) (“Depression is the most important risk factor for suicide.”)). 16 App. 164. 11 that hypertension, suicide, and depression would be a review issue; that the adverse events might impact labeling; and that an advisory committee might be needed. Read in context, however, the statement is an opinion about the timing of Xyosted’s regulatory milestones. It does not speak to the substance or contents of the FDA’s review, only that Xyosted was “working with [the FDA] to hit the [application review period end-date] of October 20[, 2017].” Supp. App. 378. Plus, there is no basis to conclude (nor is one alleged) that Apple did not genuinely believe what he was saying at the time he said it. Nowhere in the complaint does Plaintiff allege that the risks arising out of the FDA’s feedback were out of the ordinary or that they presented a special challenge not normally confronted by pharmaceutical companies seeking FDA approval for their drugs. Finally, Antares did not need to disclose the 2016 interim feedback from the FDA. See In re Sanofi Sec. Litig., 87 F. Supp. 3d 510, 541–42 (S.D.N.Y. 2015) (collecting cases in which “courts have rejected claims of material omissions where pharmaceutical companies did not reveal procedural or methodological commentary, or other interim status reports, received from the FDA as to drugs under review”), aff’d sub nom. Tongue v. Sanofi, 816 F.3d 199 (2d Cir. 2016). This allegation is not actionable. 4. Perfect candidate and no one excluded While on a different quarterly earnings conference call, CEO Apple stated that “anyone who is diagnosed with testosterone deficiency, we believe, is the perfect candidate for Xyosted” and that “there isn’t any particular patient population that has 12 testosterone deficiency that we’re excluding or that we think is a better candidate.”17 Plaintiff contends that these statements were false or misleading because (1) the clinical studies demonstrated that patients suffering from hypertension, depression, and suicidal ideation were objectively less suitable for Xyosted; and (2) Defendants themselves had excluded patients with high blood pressure from the second clinical study. The first statement is non-actionable corporate puffery. CEO Apple is not relaying a “concrete” representation about Xyosted; he instead uses a “vague and subjective” superlative in making a “positive portrayal[]” of the company’s product. In re Aetna, Inc. Sec. Litig., 617 F.3d 272, 284 (3d Cir. 2010); see also All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 868 (7th Cir. 1999) (explaining that statements are puffery if they are “empty superlatives on which no reasonable person would rely”). The materiality of the statement is further diminished by the knowledge that suicidal ideation and depression are symptoms of testosterone deficiency and occur in subjects using testosterone replacement therapies, which the FDA highlighted in its clinical review. Supp. App. 459. Similarly, the FDA noted that “[e]levated blood pressure is a treatable condition that providers who are treating patients with Xyosted should be able to manage.” Supp. App. 463. The next statement presents a closer call. Like the District Court, we conclude that Apple’s statement that no particular patient population was excluded has the potential to mislead investors. It is not puffery because it is an objectively verifiable fact; 17 App. 165–66. 13 patients either were or were not excluded. See Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175, 184 (2015). Nonetheless, we find the statement immaterial because it would not alter the total mix of relevant information available to a reasonable investor. Given that the FDA approved the methods and procedures employed in the second clinical study, no reasonable investor would be concerned with patient enrollment data with which the FDA did not take issue.18 See In re Sanofi Sec. Litig., 87 F. Supp. 3d at 533 (“Had the FDA at any point concluded that there were ‘serious defects in study design that would render the study incapable of producing valid evidence of safety and effectiveness,’ it had ‘authority to issue a clinical hold.’”) (quoting 52 Fed. Reg. 8798).