368 F. Supp. 3d 750
S.D. Ill.2019Background
- Plaintiff Local 731 sued Alkermes and certain officers alleging securities fraud under Section 10(b)/Rule 10b-5 and control-person liability under Section 20(a), based on statements about Vivitrol’s adoption, efficacy, and comparative advantages.
- Complaint alleges Alkermes promoted Vivitrol as "organic" and "self-propagating," and made affirmative efficacy statements (e.g., that Vivitrol "prevents relapse" or patients "will not relapse").
- Plaintiff contends those statements were misleading because Alkermes engaged in aggressive, allegedly deceptive marketing and lobbying to criminal justice stakeholders and possessed internal data suggesting significant relapse/attrition rates.
- The defendants moved to dismiss under Rule 12(b)(6); parties submitted many exhibits (FDA labels, SEC filings, investor materials), and the court addressed which extrinsic materials it could consider on the motion.
- The court found most challenged statements non-actionable (puffery, aspirational, or factual statements not shown false at the time made) but identified one potentially actionable half-truth: Frates’ July 28, 2016 statement attributing accelerating sales to criminal-justice focus and "organic growth."
- The court dismissed the complaint with prejudice because plaintiff failed to plead a strong inference of scienter for any individual or for corporate scienter; dismissal of the primary securities claim defeated the Section 20(a) claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether extrinsic exhibits may be considered on motion to dismiss | Exhibits show public disclosure and internal data contradicting statements | Many exhibits not attached or integral to the complaint; judicial notice limited to facts of public disclosure | Court considered FDA labels and certain SEC materials for fact of disclosure; declined to consider most investor materials and internal letters not referenced in complaint |
| Whether defendants made actionable misstatements/half-truths about Vivitrol’s growth | Statements portraying adoption as "organic" omitted that aggressive marketing/lobbying actually drove growth, rendering statements misleading | Such characterizations are puffery/aspirational or truthful descriptions and not misleading; boilerplate statements about "customary marketing practices" not actionable | Most growth statements non-actionable; Frates’ July 28, 2016 statement plausibly actionable as a half-truth because it linked sales growth to criminal-justice programs while allegedly omitting the role of intense marketing |
| Whether efficacy statements (e.g., "prevents relapse," "will not relapse") were false or misleading | Statements overstated efficacy; internal/academic data and reported overdoses show relapse/overdose occurred within 28 days, contradicting claims | Statements reflect expectations/opinions and reference the FDA label; not literal guarantees of no relapse and not shown false at the time | Efficacy statements were non-actionable: framed as expectation/opinion tied to label and not shown false when made; isolated post-hoc adverse events do not establish falsity at time of statements |
| Whether plaintiff adequately pleaded scienter (intent or recklessness) | Insider stock sales and internal materials, circulation of anti-competitor white paper, and core-operations allegations show motive or access to contradictory information | Sales were not suspiciously timed or unusual; plaintiff fails to tie alleged adverse information to the individual speaker(s); core-operations allegations insufficient alone | Plaintiff failed to plead a strong inference of scienter for any individual or corporate scienter; scienter requirement not met; claim dismissed with prejudice |
Key Cases Cited
- Global Network Commc'ns, Inc. v. City of N.Y., 458 F.3d 150 (2d Cir.) (conversion/incorporation-by-reference principles for 12(b)(6) motions)
- Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148 (U.S.) (elements of a Section 10(b) claim)
- Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (U.S.) (distinguishing statements of fact and opinion and when opinions can be actionable)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S.) (standard for pleading a "strong inference" of scienter under the PSLRA)
- Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406 (2d Cir.) (judicial notice of SEC filings — can be considered for what they state, not for truth)