Court Opinion

ID: 4114198
Source: CourtListenerOpinion
Date Created: 2017-01-09 21:00:40.03225+00
Date Added: 2024-06-11T07:46:14.007989
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 15-1544

                          EDMOND GANEM,

                      Plaintiff, Appellant,

BATTLE CONSTRUCTION CO., INC., individually and on behalf of all
             others similarly situated; STEVE ADAMS,

                           Plaintiffs,

                               v.

       INVIVO THERAPEUTICS HOLDINGS CORP.; FRANK REYNOLDS,

                     Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Richard G. Stearns, U.S. District Judge]

                             Before

                      Howard, Chief Judge,
                Selya and Lipez, Circuit Judges.

      Thomas G. Shapiro, with whom Patrick J. Vallely and Shapiro
Haber & Urmy LLP were on brief, for appellant.
      Michael G. Bongiorno, with whom James W. Prendergast, Andrew
S. Dulberg, Wilmer Cutler Pickering Hale and Dorr LLP, Richard J.
Rosensweig, Paul F. Beckwith, Derek B. Domian, and Goulston &
Storrs PC were on brief, for appellee InVivo Therapeutics Holdings
Corp.
      Richard J. Rosensweig for appellee Frank Reynolds.
January 9, 2017
           LIPEZ, Circuit Judge.           Following a drop in the share

price of InVivo Therapeutics Holdings Corporation's ("InVivo")

common stock, investors filed suit against the company and its

former chief executive officer ("CEO"), Frank Reynolds, 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 10b-5, 17 C.F.R. § 240.10b-5.               On behalf

of himself and a putative class of shareholders, lead plaintiff

Edmond Ganem ("Ganem") alleges that InVivo and Reynolds inflated

the value of InVivo's common stock for about five months in 2013

by   issuing   false     or   materially       misleading   press     releases

concerning the approval of human clinical trials for a new medical

device the company was developing, by, inter alia, failing to

identify the caveats and conditions imposed by the Food and Drug

Administration ("FDA") for the clinical trials.                 The district

court, in a well-reasoned opinion, granted defendants' motion to

dismiss the complaint. We affirm, agreeing with the district court

that Ganem has failed to allege false or misleading statements

sufficient to state a claim under Section 10(b) and Rule 10b-5,

and, having failed to plead a viable claim of a primary violation,

Ganem's control person claim against Reynolds under Section 20(a)

was also properly dismissed.

                                     - 3 -
                                   I.

A. Factual Background

           According to InVivo's 2012 annual report to the SEC

("Form 10-K"), which was filed in early March 2013, the company

focuses on "develop[ing] and commercializ[ing] new technologies

for the treatment of spinal cord injuries."      The report identified

InVivo's   "Lead     Product   Under    Development"   as   "biopolymer

scaffolding," a device that would attach to a patient's body at

the point of a spinal injury to prevent additional damage to the

spinal cord.       The report outlined the company's strategy for

marketing the device, including the steps for securing the required

approval from the FDA.

           The report explained that InVivo would first need to

obtain an Investigational Device Exception ("IDE") to permit it to

conduct human clinical trials.          Such a clinical study was a

prerequisite for obtaining either Pre-Market Approval ("PMA") or

a Humanitarian Device Exemption ("HDE"), either of which would

permit the company to sell the product in the United States.

InVivo stated that it "plan[ned] to conduct an initial clinical

study to evaluate the device in five spinal cord injury patients

with acute thoracic injuries.          We are also planning a larger

follow-on human study in acute spinal cord injury patients after

the initial study is completed."

                                 - 4 -
          In the report, InVivo qualified the above statements,

noting that "forward-looking statements" -- such as "statements

about our plan to conduct an initial clinical study to evaluate

our product" -- are necessarily contingent because they "involve

substantial known and unknown risks."   InVivo stated that "[t]he

start of clinical trials can be delayed or take longer than

anticipated for many and varied reasons, many of which would be

outside of our control."

          On March 29, 2013, the Acting Director of the FDA's

Office of Device Evaluation sent an eleven-page letter to InVivo.

Because Ganem's claims rely on the proposition that InVivo later

misrepresented the content of the letter, we quote from it at some

length:

          The [FDA] has reviewed your amendment to your [IDE]
          application to conduct an early feasibility study
          . . . . Your application to begin your study is
          approved with conditions . . . .     You may begin
          your investigation, using a revised informed
          consent document which corrects deficiency number
          1 and 3, at an institution in accordance with the
          investigational site waiver granted below.     Your
          investigation is limited to 3 institutions and 1
          subject.

          Your IDE application has been approved with
          conditions as a staged study; you may enroll one
          subject at this time.      You should follow this
          subject for 3 months before requesting approval for
          an additional subject, who should also be followed
          for three months before requesting another subject.
          This will result in a total of 5 subject[s] enrolled
          over a minimum 15 month period. . . .

                              - 5 -
          A feasibility study is a preliminary study which is
          not expected to provide the primary support for the
          safety and effectiveness evaluation of a medical
          device   for   the   purposes    of   a   marketing
          application. . . . FDA believes that additional
          modifications, as outlined in "Study Design
          Considerations" below, are needed for your study
          design     to    support     a     future    study.

          This approval is being granted on the condition
          that, within 45 days from the date of this letter,
          you submit information correcting the following
          issues[.]

The FDA listed thirteen issues for which it required further

information before the initial study could begin.1        Then, under

"Study   Design   Considerations,"   the   FDA   stated   that   "[w]e

recommend, but do not require, that you modify your study to

address the following issues" so that it could support a future

study, listing eight specific issues.2

          The following week, on April 5, 2013, InVivo issued the

three-page press release at the heart of Ganem's complaint:

     1 These thirteen issues required InVivo to, among other
things: make revisions to its draft informed consent document,
provide results from preclinical animal testing, provide certain
test protocols and reports for FDA review, and remove specified
language from product labeling.
     2 These modifications included, for example: a recommendation
to include a randomized control group; a recommendation that InVivo
"pre-specify . . . effectiveness and safety endpoints"; a
recommendation that InVivo “include the age range of the study
population” in the “Indications for Use”; and a recommendation
that InVivo accompany all symbols on its "carton labeling" (such
as "Rx") with descriptive text.

                               - 6 -
          InVivo Therapeutics Receives Approval from FDA for
          First Human Trial Using Biomaterials for Traumatic
          Spinal Cord Injury

          . . .   InVivo Therapeutics Holdings Corp. . . .
          today announced that the U.S. Food and Drug
          Administration (FDA) has approved the Company's
          Investigational Device Exemption (IDE) to begin
          human studies to test its biopolymer scaffold
          product, a technology developed to treat patients
          with acute, traumatic SCI.

          With this approval, InVivo intends to commence a
          first-in-man clinical study in the next few months
          that will test safety and performance of its
          biopolymer scaffold in five patients. The Company
          expects the study to occur over approximately 15
          months. There are currently no treatment options
          approved by the FDA, or in clinical trials, to
          intervene directly in the spinal cord following
          SCI. The trial will be conducted at multiple U.S.
          hospitals, and work to gain Institutional Review
          Board (IRB) approval at Massachusetts General
          Hospital in Boston is already underway.

          " . . . [W]hen conducting a first-in-man study, it
          is imperative to take the time to get it right,
          because any mistakes can lead to years of lost time
          for the scientists and patients that follow," said
          Frank Reynolds, InVivo Chief Executive Officer.

          . . .

          Continued Reynolds, "Over the next month or so, we
          plan to finalize the details of our study, and we
          expect to have all data to the FDA by the end of
          2014. We will be conducting an open label study,
          and so we look forward to keeping the public aware
          of its progress. . . ."

          The press release did not reveal that FDA approval was

conditional, or list any of the conditions, or explain that the

FDA had recommended changes to the study protocol in order to allow

                              - 7 -
the staged study to support future studies.            The release did,

however, contain a "Safe Harbor Statement" indicating that certain

statements in the press release were covered by the Exchange Act's

statutory safe harbor for "forward-looking statements."3         The safe

harbor statement explained that the covered statements included

"those related to the expected approval of the FDA to conduct human

clinical   trials   for     the   Company's    products,   the   expected

commencement date of any approved human clinical trials, the

expected size of the pilot study, the expectation that the scaffold

product will be regulated under an HDE pathway, and the expected

acceleration   of   commercialization     of   the   Company's   products

resulting therefrom[,]" which were "subject to a number of risks

and uncertainties[,]" including "risks and uncertainties relating

to the Company's ability to obtain FDA approval to conduct human

clinical trials[.]"       The release also referred to InVivo's Form

10-K, which described the potential risks in more detail.

           Ganem alleges that the price of InVivo stock increased

as a result of the apparent good news contained in the press

     3 The Exchange Act's safe harbor provision is found in
15 U.S.C. § 78u-5. Under this provision, a person "shall not be
liable" with respect to any "forward-looking statements when not
made with knowledge of falsity or when the statement itself is
identified as forward-looking and is accompanied by 'meaningful
cautionary statements identifying important factors that could
cause actual results to differ materially from those in the
forward-looking statement.'" Hill v. Gozani, 638 F.3d 40, 54 (1st
Cir. 2011) (quoting 15 U.S.C. § 78u–5(c)(1)(A)(i)).

                                  - 8 -
release.   Historical stock prices cited by both parties indicate

that there was a relatively high volume of trading on Monday, April

8, 2013, after the press release the previous Friday.           That day,

the stock price rose from $2.85 per share to $3.19 per share.

           Ganem   also   points   to   alleged    misrepresentations   in

another press release from May 9, 2013.      In that release, Reynolds

was quoted as saying "[w]e are off to a great start for 2013 and

continue   to   successfully   accelerate    our    plans[.]"    It   also

reiterated some of the statements made a month earlier: "In April

2013, the FDA approved InVivo's Investigational Device Exemption

(IDE) application to begin human studies to evaluate its biopolymer

scaffold product for acute traumatic SCI. . . .            [T]he product

will be evaluated in five patients.           The Company expects to

commence the study in mid-2013 and submit data to the FDA by the

end of 2014."   The May 9 release contained a safe harbor statement

similar to the one in the April 5 release.         Ganem does not allege

any change in InVivo's stock price resulting from the May 9

release.

           Finally, on August 27, 2013, before regular trading

hours, InVivo issued a press release titled "InVivo Therapeutics

Updates Clinical Plan."     That release said:

           The Company now expects that, based on the judgment
           of new management, it will enroll the first patient
           during the first quarter of 2014.

                                   - 9 -
           Under the conditions of the FDA's approval of the
           Investigational Device Exemption, the five-person
           pilot trial will be staggered such that each
           patient will be followed for three months prior to
           requesting approval to enroll the next patient.
           Because the Company must obtain FDA approval to
           enroll each subsequent patient, the Company
           anticipates that from the date of the first
           enrolled patient, it will take at least 21 months
           to complete enrollment.      Consistent with FDA
           guidance, the Company then expects to conduct a
           pivotal study with a control group to obtain FDA
           approval to commence commercialization under a
           Humanitarian Device Exemption.

Interim CEO Michael Astrue was quoted as saying: "While the study

will take additional time, we look forward to bringing this

important therapy into the clinic."

           Ganem   alleges   that    InVivo's   stock   price   dropped   in

reaction to the revised 2014 start date and estimated 21-month

time for completion of the clinical trial revealed in this press

release.     Historical stock prices show that an unusually high

volume of trading started on Friday, August 23, 2013, and continued

from Monday, August 26 through the end of the class period on

August 28.    The stock price fluctuated during those four trading

days, ultimately dropping from $4.00 per share at the opening of

trading on August 23 to $2.07 at the close of trading on August 28.

B. Procedural Background

           Ganem brought this action against InVivo and its former

CEO, Reynolds, on behalf of a putative class "consisting of all

persons and entities who purchased the common stock of [InVivo]

                                    - 10 -
from April 5, 2013, through August 26, 2013, inclusive" -- i.e.,

all   purchasers      of   stock   between   the   dates    of    the    initial

announcement of the clinical trial and the press release nearly

five months later that revealed problems with the timeline for the

trial. The operative amended complaint asserted two claims: first,

that InVivo and Reynolds deceived investors into buying common

stock     at   high   prices,   artificially   boosted     by    the    false   or

misleading press releases, in violation of § 10(b) of the Exchange

Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17

C.F.R. § 240.10b-5; and, second, that Reynolds is liable as a

"controlling person" under § 20(a) of the Exchange Act, 15 U.S.C.

§ 78t(a).

               The district court rejected both claims, concluding that

Ganem had failed adequately to plead material misrepresentations

or scienter supporting a claim under § 10(b) and Rule 10b-5, and

that, absent a primary violation under § 10(b), Ganem's derivative

control person claim against Reynolds must be dismissed. Battle

Constr. Co., Inc. v. InVivo Therapeutics Holdings Corp., 101 F.

Supp. 3d 135, 141-42 & n.6 (D. Mass. 2015).          We focus on the claim

under § 10(b) and Rule 10-b5 (the "10(b) claim").4                 We review a

      4 Because, as we explain, the district court properly
dismissed the § 10(b) claim, the derivative control person claim
under § 20(a) was also properly dismissed.     Automotive Indus.
Pension Tr. Fund v. Textron Inc., 682 F.3d 34, 36 n.2 (1st Cir.
2012).

                                    - 11 -
dismissal for failure to state a claim de novo.           SEC v. Tambone,

597 F.3d 436, 441 (1st Cir. 2010) (en banc). We accept as true all

well-pleaded allegations in the complaint and make all reasonable

inferences in favor of the pleader.         Id.

                                    II.

A. The Exchange Act and Rule 10-b5.

             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, in the light of the circumstances under which

they were made, not misleading."        17 C.F.R. § 240.10b-5.   To 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.     In re Ariad Pharm., Inc. Sec. Litig., 842 F.3d 744,

750 (1st Cir. 2016)(citing ACA Fin. Guar. Corp. v. Advest, Inc.,

512 F.3d 46, 58 (1st Cir. 2008)).

                                - 12 -
               Only    the      first        two   elements   --    a     material

misrepresentation or omission and scienter -- are implicated by

this       appeal.    Though     Ganem       contests   the   district     court's

conclusions as to both, we begin and end with the first.5                       To

establish a material misrepresentation or omission, Ganem must

show       "that   defendants    made    a    materially   false   or   misleading

statement or omitted to state a material fact necessary to make a

statement not misleading."          Geffon v. Micrion Corp., 249 F.3d 29,

34 (1st Cir. 2001).             "[M]ere possession of material, nonpublic

information does not create a duty to disclose it,"                      Hill, 638
F.3d at 57 (internal punctuation omitted), but "when a company

speaks, it cannot omit any facts 'necessary in order to make the

statements made, in the light of the circumstances under which

       5
       InVivo also argues that its forward-looking statements are
protected by the bespeaks caution doctrine, which "embodies the
principle that when statements of 'soft' information such as
forecasts, estimates, opinions, or projections are accompanied by
cautionary disclosures that adequately warn of the possibility
that actual results or events may turn out differently, the 'soft'
statements may not be materially misleading under the securities
laws." Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1213 (1st Cir.
1996); see also id. at 1213 n.23. InVivo does not, however, invoke
the statutory safe harbor codifying the bespeaks caution doctrine,
15 U.S.C. § 78u-5(c)(1), because, it explains, "arguably, the
[statutory] safe harbor does not apply to the challenged statements
because, while InVivo is now listed on the NASDAQ, the Company
could have been, at the time, considered an issuer of 'penny
stock.'" See id. § 77z-2(b)(1)(C) (excluding issuers of "penny
stock" from the statutory safe harbor). Because the absence of a
material misrepresentation or omission is determinative, we need
not decide the applicability of either the bespeaks caution
doctrine or the statutory safe harbor to InVivo's statements.

                                         - 13 -
they       were    made,    not   misleading.'"       Id.    (quoting       17      C.F.R.

§ 240.10b-5); see also Matrixx Initiatives, Inc. v. Siracusano,

563 U.S. 27, 37 (2011)

              Finally,      "[a]s    with    all     allegations       of    fraud,       a

plaintiff         must   plead    the   circumstances       of    the       fraud      with

particularity, pursuant to Rule 9(b)."                  Hill, 638 F.3d at 55.

Moreover, under the additional pleading requirements imposed by

the Private Securities Litigation Reform Act ("PSLRA"), in order

to survive a motion to dismiss, the plaintiff must "specify each

statement alleged to have been misleading [and] the reason or

reasons why the statement is misleading."                   ACA Fin. Guar. Corp.,
512 F.3d at 58 (modification in original) (quoting 15 U.S.C. §

78u–4(b)(1)); see also Hill, 638 F.3d at 54-56 (discussing the

history and purpose of the PSLRA).                 As we have previously noted,

although "the PSLRA does not require plaintiffs to plead evidence

. . . a significant amount of 'meat' is needed on the 'bones' of

the complaint."          Id. at 56 (citation omitted).

B. Analysis of the Claims.

              Ganem claims that the statements in InVivo's April 5 and

May    9    press    releases     about     the   projected      timeline        for   the

preliminary         study     were      materially     false      or        misleading.

Specifically, with regard to the start date of the study, the April

5 release expressed the intention that the study begin "in the

next few months," and the May 9 release predicted it would start

                                         - 14 -
"in mid-2013."     Regarding the duration of the study, the April 5

release   said   that     InVivo    "expects   the     study    to   occur     over

approximately 15 months."          As for the end date of the study, the

April 5 release said "we expect to have all data to the FDA by the

end of 2014," and the May 9 release predicted that InVivo would

"submit data to the FDA by the end of 2014."

           Ganem   claims     that    InVivo's   failure       to    mention    the

details of the FDA approval letter rendered these statements

materially false or misleading.         He cites three allegedly material

omissions: (1) the FDA's         requirement that InVivo satisfy a number

of conditions within 45 days (including correcting the informed

consent   form   before    testing    could    begin    on     the   first   human

subject); (2) the FDA's recommendation that InVivo modify its study

design so that the preliminary study could serve as the basis for

approval of a larger follow-on study; and (3) the FDA requirement

of a staged study, in which separate FDA approval was required for

each of five stages.

           According        to      Ganem,     the      FDA's        conditions,

recommendations, and requirement of a staged study inevitably

prevented InVivo from following through on its stated timeline.

He alleges that "Defendants failed to disclose in the April 5 and

May 9 press releases that the FDA's approval of the clinical study

included conditions that made it impossible to complete the study

in 15 months or to submit data to the FDA by the end of 2014, as

                                     - 15 -
represented."   Am. Compl. ¶ 34.       In short, Ganem's theory of

material misrepresentation is that InVivo's omissions about the

content of the FDA approval letter rendered the company's temporal

predictions materially misleading.

          Like the district court, however, we readily conclude

that none of the challenged statements is false or misleading. We

discuss each of the allegedly false or misleading statements in

turn.

          1. Commencement of the Clinical Trial.

          Ganem contends that InVivo misrepresented the imminence

of the commencement of the study when the company reported in April

that it would begin "in the next few months" and in May that it

was expected to begin "in mid-2013." According to Ganem, the "mid-

2013" start date provided by InVivo would be impossible to achieve

given the conditions imposed by the FDA, thus making InVivo's

optimistic statements materially misleading.       However, as the

district court found, "any objective reading of the [approval]

letter makes clear that the FDA erected no material barriers to an

immediate enrollment of the first patient for the exploratory

study."   Although the FDA required particular changes to the

informed consent form before the first human was tested, Ganem

understandably does not argue that simply changing a form could

have delayed the beginning of the study.     Also, as the district

court found, "[w]hile the FDA did require additional information

                              - 16 -
of a corrective nature from InVivo, it did not condition the first

enrollment on the prior receipt of this information."         In fact,

the FDA's letter explicitly permits a start date in the near

future:   "[InVivo] may enroll one subject at this time."     Further,

although the FDA required additional information within 45 days,

Ganem alleges no facts suggesting that InVivo would fail to meet

that deadline.    And, though InVivo needed to obtain Institutional

Review Board approval to use each testing site, Ganem alleges no

facts suggesting that this would delay the beginning of the study

beyond    the   "few   months"   InVivo    projected.   Indeed,   InVivo

represented in the April 5 press release that it was already

"work[ing] to gain Institutional Review Board (IRB) approval at

Massachusetts General Hospital," making clear that the approval

had not yet been obtained.

            Ganem also alleges that InVivo's statements regarding

commencement of the study were misleading because the FDA letter

required InVivo to make eight specific modifications to its initial

feasibility study for that study to support a future, separate

study, and implementing such modifications would make InVivo's

proposed timeline impossible to meet. As an initial matter, this

argument fails for the simple reason that Ganem alleges no facts

suggesting that InVivo could not make these eight changes within

the proposed timeline, a necessary showing for the statements to

have been misleading when made.      See 15 U.S.C. § 78u–4(b)(1); ACA

                                  - 17 -
Fin. Guar. Corp., 512 F.3d at 62 ("The PSLRA requires plaintiffs'

complaint       to    'specify       each        statement     alleged    to   have    been

misleading [and] the reason or reasons why the statement is

misleading.'") (alteration in original).                         Moreover, the FDA did

not require InVivo to make these eight changes before commencing

its initial feasibility study. The FDA, in fact, stated that "[w]e

recommend, but do not require, that you modify your study to

address the following issues."                   Although Ganem alleges that going

forward without the recommended changes would have made "no sense"

and   would         serve   "no     purpose,"        Ganem's     own     speculation    and

conjecture about InVivo's business decisions cannot substitute for

well-pleaded facts.

               2. Duration of the Clinical Trial

               In    alleging       that      InVivo's       statements    regarding    the

estimated duration of the study were false or misleading, Ganem

relies    on    the     proposition           that   a   fifteen-month      duration    was

impossible,         particularly         in    light     of    the    sequential   patient

enrollment process that the FDA required, which InVivo did not

disclose       in    its    April    5     and    May    9    press   releases.6       Ganem

      6Ganem similarly argues that "[InVivo's] statement that the
FDA 'has approved' a study to evaluate 'five patients' was false."
This claim is without merit. InVivo's April 5 release says that
the FDA approved InVivo's plan "to begin human studies," and that
"InVivo intends to commence a . . . study . . . in five patients,"
and its May 9 release repeats that the approval was "to begin human
studies," adding that "the product will be evaluated in five
patients." These statements are not "literally false" as Ganem

                                              - 18 -
acknowledges, however, that the FDA itself wrote that the staged

study "will result in a total of 5 subject[s] enrolled over a

minimum of [a] 15 month period."           Ganem also acknowledges, as he

must, that if each subject was observed for the required three

months and then the next subject was enrolled almost immediately,

observing five subjects would take approximately fifteen months.

            Ganem insists, however, that it would be impossible to

do   this   study   in   these   fifteen   months   because   of   the   steps

necessary after each patient was observed for the requisite three

months -- at a minimum, reviewing the data, preparing a report for

the FDA, and waiting for FDA approval to proceed with the next

patient.     As with Ganem's other claims, however, this timing

allegation is not supported by any well-pleaded facts.             We have no

basis on which to conclude that it would take a significant length

of time to complete the steps for each patient, and the only

available evidence -- the FDA's own letter suggesting a fifteen-

month minimum testing period -- suggests the opposite.

            3. Submitting data to the FDA

            As for the timing of InVivo's submission of data to the

FDA at the end of the study, Ganem relies on the assumption that

analyzing the data from the study would take a significant amount

claims.   InVivo correctly stated that the FDA had approved a
clinical trial expected to ultimately include five patients.
InVivo did not say that the FDA had already approved the enrollment
of all five patients.

                                    - 19 -
of time after all five patients had been observed for three months

each.   Again, Ganem provides no facts supporting this assertion.

Ganem does not explain why he believes that the analysis and

preparation of the data could only begin after all the data is

collected, nor does he point to any FDA requirement that InVivo

actually analyze the data at all before submitting it.          Ganem's

allegations amount to nothing more than unsupported speculation.

           Thus, to support a claim that InVivo's statements were

false or misleading, Ganem is left only with the inference that

because, in retrospect, the test lagged significantly behind the

proposed timeline, the timeline must have always been impossible

to achieve. Yet, as the district court properly recognized, "fraud

by hindsight" does not satisfy the pleading requirements in a

securities fraud case.    See ACA Fin. Guar. Corp. 512 F.3d at 62

("A plaintiff may not plead 'fraud by hindsight'; i.e., a complaint

'may not simply contrast a defendant's past optimism with less

favorable actual results' in support of a claim of securities

fraud." (quoting Shaw 82 F.3d at 1223)); Gross v. Summa Four, Inc.,

93 F.3d 987, 991 (1st Cir. 1996).   The securities laws do not make

it unlawful for a company to publicize an aggressive timeline or

estimate   for   a   proposed   action   without   disclosing     every

conceivable stumbling block to realizing those plans. Hence, while

"greater clairvoyance" might have led InVivo to propose a more

conservative timeline, "failure to make such perceptions does not

                                - 20 -
constitute fraud."    Denny v. Barber, 576 F.2d 465, 470 (2d Cir.

1978) (Friendly, J.).

                                    III.

          In   sum,   Ganem   has    failed   to   allege   any   material

misrepresentation or omission sufficient to state a claim under

§ 10(b) and Rule 10b-5.        Hence, the district court properly

dismissed the complaint.

          Affirmed.

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