861 F. Supp. 2d 1030
N.D. Cal.2012Background
- This is a securities class action against Medivation, Inc. and officers over the Dimebon Alzheimer’s trials; TAC alleges misrepresentations about a Phase 2 double-blind, randomized, placebo-controlled study and its results.
- Dimebon was originally used in Russia; Medivation acquired Dimebon rights in 2003 and conducted a Phase 2 study with 183 Russian-site patients.
- Plaintiffs rely on confidential witnesses from Orgánica alleging uncoated pills and unmatched placebos, and on Dr. Schneider’s observations to claim unblinding.
- Phase 3 results in the U.S. were disappointing, leading to a large stock drop and Pfizer collaboration later.
- The Court previously dismissed the CAC for lack of strong scienter and allowed a TAC with new confidential-witness allegations; Defendants now move to dismiss with prejudice.
- The Court grants the motion, finding inadequate falsity and no strong inference of scienter under pleading standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TAC states a §10(b)/Rule 10b-5 falsity claim | Plaintiffs contend Phase 2 was not double-blind and pills were unmatchable. | Defendants contend the Phase 2 details were adequately supported and not proven false. | Falsity not pled with particularity; dismissal affirmed. |
| Whether the TAC pleads strong scienter under PSLRA | Confidential witnesses and Dr. Schneider show purposeful fraud. | Witnesses unreliable; no cogent inference of scienter. | No strong inference of scienter; dismissal upheld. |
| Whether the confidential-witness allegations meet Daou/Zucco reliability requirements | CW descriptions and corroboration support personal knowledge. | CW descriptions are vague, conflicting, and hearsay. | Confidential-witness reliability inadequate; dismissals sustained. |
| Whether insider trading by defendants supports scienter | $22M in sales plus stock loss could indicate fraud. | Overall stock decline and vested options negate inference of fraud. | Insider trading not strongly indicative of scienter. |
Key Cases Cited
- In re Daou Sys., Inc. Sec. Litig., 411 F.3d 1006 (9th Cir.2005) (requires particularity for falsity and scienter under PSLRA)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (strong inference standard for scienter)
- Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir.2009) (particularity and reliability of confidential witnesses)
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (requirement of pleading loss causation and falsity)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must plead plausible claims, not mere conclusory recitals)
- Twombly, 550 U.S. 544 (U.S. 2007) (pleading standard requires plausible grounds for relief)
- Lipton v. Pathogenesis Corp., 284 F.3d 1027 (9th Cir.2002) (motive alone insufficient for strong inference of scienter)
- In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970 (9th Cir.1999) (consider vested options in assessing insider-trading implications)