ALBERICI v. RECRO PHARMA, INC., 2:18-cv-02279

Background

Recro developed intravenous meloxicam (IV meloxicam) and solicited feedback from 200–300 Key Opinion Leaders (KOLs) during 2017–2018 about prospective uses and manufacturing.
A confidential witness (CW1), a senior Medical Affairs employee, alleges he repeatedly reported that a significant majority of KOLs would not use IV meloxicam for soft-tissue procedures and that ~30% of KOLs had concerns about insufficient manufacturing oversight in Ireland.
Between July 2017 and May 2018 Recro made public statements touting soft-tissue market opportunities, citing ~30% expected case-use from surveys, and representing manufacturing was overseen by internal managers; Henwood signed a SOX certification.
On May 24, 2018 the FDA initially denied the NDA and Recro issued a disclosure; Recro’s stock dropped. Plaintiff sued under §10(b) and §20(a).
This Court previously dismissed the First Amended Complaint for failure to plead scienter with particularity but found materiality and loss causation sufficiently alleged. Plaintiff filed a Second Amended Complaint adding specifics.
The FDA later approved IV meloxicam on February 20, 2020. The Court denied Defendants’ second motion to dismiss, holding the SAC adequately pleads scienter, falsity/actionability, and loss causation survives despite the later FDA approval.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Scienter (state of mind)	CW1 personally and repeatedly reported KOL efficacy and manufacturing concerns to Individual Defendants at Leadership Team, advisory board, and sales meetings; these allegations supply who/what/when/where/how.	Allegations rely on a single CW and lack particularized detail about when and what each defendant knew to establish a strong inference of recklessness or intent.	The SAC, taken holistically, pleads facts giving rise to a strong inference of scienter; dismissal denied.
Falsity/actionability of Target Opportunity and Market Frequency statements	Statements about soft-tissue market and ~30% use were misleading because they omitted contemporaneous KOL warnings that the drug was unsuitable for soft-tissue use.	Statements were forward‑looking, appropriately cautious, and the later FDA approval shows they were not false.	Alleged omissions were of present facts (KOL feedback) and could render forward‑looking statements misleading; PSLRA safe harbor does not mandate dismissal.
Manufacturing oversight statement and SOX certification	10‑K language implying multiple internal managers was misleading because only one manager oversaw IV meloxicam; Henwood’s SOX certification is actionable if tied to scienter.	The 10‑K referenced oversight across products (so plural was accurate); SOX certification is a legal conclusion and not independently actionable.	A reasonable investor could read the language as implying multiple managers for IV meloxicam; because falsity and scienter are plausibly alleged, the SOX certification is actionable.
Loss causation; effect of FDA’s 2020 approval	The May 2018 corrective disclosure revealed omitted KOL concerns and caused the stock drop; subsequent FDA approval does not erase that corrective disclosure.	The 2020 FDA approval undermines the notion that investors suffered loss from misinformation about soft‑tissue prospects.	The May 2018 price decline reflected both the FDA denial and the corrective disclosure; the subsequent approval is relevant but does not negate loss causation at the pleadings stage.

Key Cases Cited

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (framework for assessing whether pleaded facts give rise to a "strong inference" of scienter).
Avaya, Inc. v. Telecom Italia, 564 F.3d 242 (3d Cir. 2009) (PSLRA particularity requirements and Rule 9(b) comparison).
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (requirement that pleadings contain factual content sufficient to state a claim).
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997) (courts may consider public records and caution on extraneous matters at Rule 12(b)(6)).
OFI Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481 (3d Cir. 2016) (rejecting fraud‑by‑hindsight and requiring plaintiffs to plead defendants did not honestly believe projections when made).
Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77 (3d Cir. 2011) (standard for construing factual allegations in Rule 12(b)(6) context).
In re Cigna Corp. Sec. Litig., 459 F. Supp. 2d 338 (E.D. Pa. 2006) (disclosure of fraud need not be sole cause of stock depreciation for loss causation).