Bradley v. ARIAD Pharmaceuticals, Inc., 2016 U.S. App. LEXIS 21235

Background

ARIAD Pharmaceuticals developed ponatinib (Iclusig) for CML and conducted multi‑phase trials: PACE 1 (MTD), PACE 2 (safety/efficacy), and EPIC (head‑to‑head vs. Gleevec).
ARIAD submitted rolling FDA materials; a July 2012 interim dataset (cut‑off July 23, 2012) was reviewed by the FDA's CDER, which noted concerns including an ~8% rate of serious cardiovascular events and high dose‑reduction rates.
On December 14, 2012, the FDA granted limited approval but required a black‑box warning; ARIAD disclosed the black box and the 8% cardiovascular rate, and the stock dropped. Later in 2013, accumulating adverse events led ARIAD to pause/stop trials and suspend marketing, and the stock fell sharply.
Shareholders sued under Exchange Act §10(b)/Rule 10b‑5 and §20(a) (securities fraud) and under Securities Act §§11 and 15 (claims tied to a January 2013 secondary offering).
The district court dismissed all claims for failure to plead scienter (Exchange Act) and material misstatements/traceability (Securities Act). Plaintiffs appealed.
The First Circuit affirmed most dismissals but reversed as to one alleged misstatement: remarks in a December 11, 2012 press report where ARIAD management expressed optimism about approval and a "favorable label" and downplayed cardiovascular signals despite recent FDA rejections and meetings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs pleaded material misstatements and scienter under §10(b)/Rule 10b‑5	ARIAD repeatedly misstated ponatinib's safety and dose‑reduction profile and knew of adverse events (per CDER data and FDA interactions)	Statements reflected then‑available data or were nonactionable optimism; plaintiffs rely on hindsight and fail to plead contemporaneous knowledge	Reversed in part: plaintiffs adequately pleaded scienter/materiality only for the Dec. 11, 2012 statements; other §10(b) allegations failed for lack of strong inference of scienter
Whether insider trades by officers support scienter	Officers sold shares suspiciously during class period, supporting intent	Trades timing, 10b5‑1 plans, and rising stock price provide innocent explanations; trades alone insufficient	Held insufficient to establish scienter for most claims; do not salvage dismissed claims
Whether plaintiffs adequately pleaded Section 11 traceability to the Jan. 2013 offering	General allegations that class shares trace to the offering suffice at pleading stage	Plaintiffs must plead facts plausibly linking their aftermarket purchases to the specific registration statement	Affirmed dismissal: general traceability allegations insufficient; plaintiffs failed to plausibly trace aftermarket purchases to the offering
Whether §20(a) control‑person claims survive if primary claims mostly dismissed	§20(a) derivative on viable §10(b) or §11 claims	No independent basis if primary claims fail	Vacated dismissal only as to §20(a) derivative of the revived Dec. 11, 2012 §10(b) claim; otherwise §20(a) claims dismissed

Key Cases Cited

Tellabs Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (scienter inference standard)
Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (loss causation/elements of securities fraud)
N.J. Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35 (1st Cir. 2008) (limits on hindsight pleading and contemporaneous knowledge)
Fire & Police Pension Ass'n of Colo. v. Abiomed, Inc., 778 F.3d 228 (1st Cir. 2015) (materiality/scienter linkage)
Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597 (4th Cir. 2015) (failure to disclose FDA communications supports scienter)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible)
Ashcroft v. Iqbal, 556 U.S. 662 (reject conclusory allegations)
In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104 (9th Cir. 2013) (pleading traceability to offering required)
Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762 (Section 11 standing/traceability)