Arkansas Public Employees Retirement System v. Bristol-Myers Squibb Co., 28 F.4th 343

Background:

Bristol-Myers Squibb conducted a Phase 3 trial of Opdivo (a PD-1 checkpoint inhibitor) for first-line non-small cell lung cancer, describing the study population as patients “strongly” expressing PD-L1 but not disclosing a numeric cutoff.
On August 5, 2016 Bristol-Myers announced the trial failed to meet its primary endpoint and for the first time disclosed the trial’s primary PD-L1 threshold was ≥5%.
Merck's competing PD-1 trial (Keytruda) had publicized a >50% PD-L1 cutoff and later reported positive results; commentators and analysts attributed Bristol-Myers’ failure to its lower 5% threshold.
Plaintiffs (several institutional investors) sued under §10(b)/Rule 10b-5, §20(a), and §20A, alleging that labeling the trial as targeting “strong” PD-L1 expression while withholding the 5% cutoff was materially misleading and made with scienter.
The district court dismissed the second amended complaint with prejudice for failure to plead a material misstatement or facts giving rise to a strong inference of scienter; the Second Circuit affirmed.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether describing the trial as targeting patients “strongly” expressing PD-L1 was a materially misleading statement or omission when the numeric cutoff was not disclosed	“Strong” was understood industrywide to mean ~50%; calling the trial for “strong” expressors while using a 5% cutoff was misleading	No industry consensus on what “strong” means; using a nonnumeric description was not false or misleading given scientific uncertainty and Bristol‑Myers’ refusal to disclose the cutoff	No material misstatement/omission: complaint fails to plead why the term was misleading given lack of consensus and analysts correctly predicted 5% cutoff
Whether Bristol-Myers had a duty to disclose the exact PD‑L1 threshold	Failure to disclose the numeric cutoff hid a material trial parameter that investors needed to assess risk	No affirmative duty to disclose every fact; disclosure not required and company expressly declined to disclose cutoff	No duty to disclose the precise threshold; nondisclosure not actionable here
Whether plaintiffs pleaded scienter (motive/opportunity or recklessness)	Industry knowledge of consensus + insiders’ stock sales + post-failure statements and departures show intent or recklessness	No industry consensus existed; insider sales were routine/10b5-1 or not unusual; post-failure candor and departures are not evidence of prior scienter	No strong inference of scienter: insider trading and other allegations insufficient
Whether secondary claims under §§20(a) and 20A survive absent a primary violation	Secondary control-liability claims valid because underlying §10(b) claim alleges primary fraud	Secondary claims depend on a primary securities violation	Dismissed along with §10(b) claims for failure to plead a primary violation

Key Cases Cited

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (limits on duty to disclose; must make statements not misleading in context)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (standard for pleading scienter: strong inference must be cogent and compelling)
Kleinman v. Elan Corp., plc, 706 F.3d 145 (2d Cir. 2013) (elements of a §10(b)/Rule 10b‑5 claim)
ECA, Loc. 134 IBEW Joint Pension Tr. of Chi. v. JPMorgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (scienter pleading: motive/opportunity or strong circumstantial evidence)
Kalnit v. Eichler, 264 F.3d 131 (2d Cir. 2001) (where motive is not shown, pleading must allege highly unreasonable conduct)
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (conclusory allegations insufficient under Rule 9(b)/PSLRA)
Operating Loc. 649 Annuity Tr. Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86 (2d Cir. 2010) (materiality measured by whether statements accurately inform, not literal truth)
Abramson v. NewLink Genetics Corp., 965 F.3d 165 (2d Cir. 2020) (opinion statements nonactionable absent embedded falsifiable facts)
Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406 (2d Cir. 2008) (judicial notice of press coverage and regulatory filings for their publication)
Fin. Acquisition Partners LP v. Blackwell, 440 F.3d 278 (5th Cir. 2006) (expert opinion cannot substitute for factual pleading under PSLRA)
Dalberth v. Xerox Corp., 766 F.3d 172 (2d Cir. 2014) (no affirmative disclosure duty absent special circumstances)
In re Scholastic Corp. Sec. Litig., 252 F.3d 63 (2d Cir. 2001) (factors for evaluating suspicious insider trading)