Court Opinion

ID: 4910315
Source: CourtListenerOpinion
Date Created: 2021-09-11 00:00:32.84624+00
Date Added: 2024-06-11T08:13:23.882710
License: Public Domain

Case: 20-20487          Document: 00516009602              Page: 1      Date Filed: 09/10/2021

              United States Court of Appeals
                   for the Fifth Circuit                                            United States Court of Appeals
                                                                                             Fifth Circuit

                                                                                           FILED
                                                                                  September 10, 2021
                                         No. 20-20487
                                                                                         Lyle W. Cayce
                                                                                              Clerk

   Paul E. Callinan; Jorge Rivera,

                                                                     Plaintiffs—Appellants,

                                              versus

   Lexicon Pharmaceuticals, Incorporated; Lonnel Coats;
   Jeffrey L. Wade; Pablo Lapuerta,

                                                                    Defendants—Appellees.

                      Appeal from the United States District Court
                          for the Southern District of Texas
                                USDC No. 4:19-CV-301

   Before Dennis and Engelhardt, Circuit Judges, and Hicks, Chief
   District Judge.*
   Per Curiam:*
          Investors in Lexicon Pharmaceuticals, Inc. brought this class-action
   suit alleging securities fraud against the company and certain of its current

          *
              Chief Judge of the Western District of Louisiana sitting by designation.
          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-20487         Document: 00516009602              Page: 2       Date Filed: 09/10/2021

                                          No. 20-20487

   and former executives.        1   Lexicon is a publicly traded biopharmaceutical
   company that develops new drugs to treat serious diseases. This case
   involves one of its drugs that ultimately failed to obtain regulatory approval
   by the Food and Drug Administration (“FDA”).
           Sotagliflozin is an oral therapy intended for use in conjunction with
   insulin therapy to improve blood sugar control in adults with diabetes. Like
   many drugs, sotagliflozin bestows benefits encumbered by risks, and its
   regulatory approval depended, in part, on whether the former outweighed
   the latter. On the benefit side of the scale, the drug improves control of blood
   sugar by functioning as an inhibitor, preventing proteins in the body from
   absorbing glucose. On the risk side of the scale, it is associated with increased
   incidences of one of the most well known and serious health risks for people
   who have diabetes: diabetic ketoacidosis (“DKA”). If left untreated, DKA
   is a life-threatening condition that results when the body produces excess
   acids in the bloodstream.
           When sotagliflozin successfully completed all three phases of clinical
   trials, the FDA convened a public advisory committee meeting.                          The
   committee put to a vote the question of whether “the available data suggest
   that the benefits outweigh the risks and support the approval of
   sotagliflozin.” That question produced a deadlocked vote by the committee,
   an impasse driven largely by concerns about the risk of DKA. Later, the FDA
   determined not to approve sotagliflozin. After both the committee vote and
   the FDA rejection, Lexicon’s stock price declined precipitously.
           Appellants claim that Lexicon made materially false and misleading
   statements and omissions about sotagliflozin, violating Section 10(b) of the

           1
           For purposes of this opinion, the investor-plaintiffs are collectively referred to as
   “Appellants” and defendants are collectively referred to as “Lexicon.”

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Case: 20-20487      Document: 00516009602          Page: 3    Date Filed: 09/10/2021

                                    No. 20-20487

   Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b–5
   promulgated thereunder, 17 C.F.R. § 240.10b–5. As relevant here, they
   advanced three theories in the district court. First, they alleged that Lexicon
   had minimized the risk of DKA posed by sotagliflozin. Second, they alleged
   that the FDA had warned Lexicon about its use of a particular endpoint in its
   Phase 3 trials and that Lexicon had failed to disclose that warning to
   investors. Third, they alleged that Lexicon failed to disclose that it had not
   prepared a meaningful DKA risk management program for sotagliflozin.
          In a careful and thorough opinion spanning 114 pages, the district
   court granted Lexicon’s motion to dismiss and rejected each of Appellants’
   theories of liability. First, it concluded that Appellants had not alleged any
   actionable misrepresentations or omissions. Second, it found that, even
   assuming Appellants’ allegations were actionable, the facts alleged do not
   support a strong inference that the misrepresentations were made with
   scienter. Finally, the district court determined that Appellants failed to plead
   loss causation. The district court also disallowed Appellants’ request to
   amend their complaint. It resolved that any additional attempt to amend
   would be futile given that they had already filed an amended complaint,
   argued strenuously that it stated claims, and failed either to submit a
   proposed second amended complaint or to describe any additional facts that
   could be alleged in it. This appeal followed.
          Attentive to the arguments advanced on appeal, we have reviewed the
   district court’s extensive opinion de novo. See Masel v. Villarreal, 924 F.3d
   734, 742–43 (5th Cir. 2019). For the reasons stated more fully by the district
   court, see Callinan v. Lexicon Pharms., Inc., 479 F. Supp. 3d 379 (S.D. Tex.
   2020), we agree that Appellants failed to state a claim with sufficient
   particularity to survive a motion to dismiss under the stringent pleading
   requirements imposed by the Private Securities Litigation Reform Act, 15
   U.S.C. § 78u–4. See Owens v. Jastrow, 789 F.3d 529, 535 (5th Cir. 2015).

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Case: 20-20487      Document: 00516009602          Page: 4    Date Filed: 09/10/2021

                                    No. 20-20487

   Moreover, the district court considered the relevant factors in determining
   not to grant leave to amend, and we cannot say that it abused its discretion in
   doing so. See Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir.
   2003).
            Accordingly, the judgment of the district court is AFFIRMED.

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